#336 How To Lose A Few Billion Dollars: Samuel Insull｜Founders

Do you remember Sam Insol, the billionaire utility tycoon from Chicago?

Do you remember how his empire collapsed and how he lost two or three billion dollars?

How the newspapers at the time called it the biggest business failure in the history

of the world?

You may remember the battle that the United States government had to extradite Insol

from Greece.

But chances are you don't remember that Insol had been in the electric business as long

as there had been an electric business.

But he had started as Thomas Edison's private secretary in 1881 that he, more than any other

man, was responsible for founding the business of centralized electric supply.

That he organized the Edison General Electric Company, now known as GE, and that he worked

out a model of nationwide product distribution that virtually all other American industry

copied that he practiced and popularized mass production and selling at the lowest possible

cost long before these ideas were attributed to Henry Ford.

That he was the first to successfully apply on a large scale the concepts of the load

and diversity factors on which all utility rates are based today.

That he brought into effect the natural monopoly principle of utility companies that he helped

create the open end mortgage that's used in financing expansion of many businesses outside

of the electric industry today.

That he was the father of effective government regulation of public utilities and the creator

of rural electrification that he pioneered successful welfare programs years before most

of business, labor, or government took any significant steps in that direction.

That he helped develop the idea and techniques of modern public relations and he was the crucial

link between PT Barnum and Madison Avenue.

That he devised methods of marketing securities that made possible gigantic modern corporations.

Next to Thomas Edison, Sam Insul is the name that you should remember as the most important

and perhaps the most notorious person in the electricity business.

That was an excerpt from the book I'm going to talk about today which is Insul, the rise

and fall of a billionaire utility tycoon and is written by Forest McDonald.

This is a very old book, it was first published in 1962 and what the book lays out is that

Insul was not just a company builder but he was actually an industry builder.

You could think of what Rockefeller was to oil, what Henry Ford was to the automobile,

with JP Morgan was to finance and what Carnegie was to steal.

Sam Insul was to electricity.

But unlike Rockefeller Ford, Morgan and Carnegie, Insul made terrible drastic mistakes at the

end of his career and he dies broke.

And so for you and I, this is going to be one of the scariest books that we could talk

about because the idea that you can be wildly successful, maybe the most successful business

man in the 1920s, have an amazing 53 year career and still be over leverage and risk everything

and die with no money is absolutely terrifying.

So I'm going to start with the relationship that he had with his father.

Insul is born and raised in England and what is most interesting is that he had all of

his dad's positive traits and none of the negative ones.

So his dad was described as imaginative, clever and enthusiastic.

What his dad did not have was energy, practical sense and fortitude.

Sam's father was idealistic, impractical and intellectual that is not how you would

describe Sam.

Sam was very smart but he was pragmatic, very much like Thomas Edison.

And another way Sam differs from his dad is there's a line in the book where it says

his dad was not interested in earning a living.

Sam was the exact opposite.

He loved operating companies.

He was a workaholic.

And that says when he was his standard work day was 16 hours a day from the very beginning

of his career and all the way up until when he was in the 70s, he was still working 16

hours a day.

Yeah, he loved operating companies and he was as we'll see, he's very, very gifted at operating

companies.

And after finishing the book and then rereading all my highlights before I sat down to

talk to you, I think his maybe is most most important trait is that he had the author

says that he had near demonic energy.

I'm going to read this paragraph to you.

This is incredible.

And this starts out when he was really young and he had incredible energy and work ethic

up until the very end.

He was small but his physical endurance was boundless and his energy was inexhaustible.

He had a peculiar metabolic makeup.

He awoke early abruptly, completely bursting with energy.

He was thinking about that.

He opens his eye and he jumps out of bed with a burning desire to achieve mission success.

This is the way it would put that.

So he'd be bursting with energy.

Yet he gained momentum as the day were on and he would work long into the night.

Later on, much later on as a matter of fact, as an adult, he learned to relax but relaxation

was a learned thing to be resorted to only when he was on the verge of physical collapse.

This sounds like Thomas Edison too.

Relaxation was an act of will. His body always told him to go and go and go because he came

from the lower middle class and sometimes he was very close to poverty from his dad's

what I would call laziness.

He started working really early.

He started having to support the family.

He's working more than full time when he's 14.

And so there's a description of him early on.

But this is something again, characteristics that he maintains throughout his entire life.

The way I would think about when you analyze and read about Sam is he had a very gifted

and deductive mind.

So Sam's most obvious attributes was a capacity for racing through large quantities of

reading material, effortlessly perceiving its important assumptions and generalizations

and thoroughly assimilating its salient details.

The way his mind worked, it said he reasoned from particulars to generalizations about

all the information that he was able to consume.

He learned to see to the heart of relations between things and to grasp the underlying

principles so clearly that he could perceive ways to shift them around and make them work

even better.

As we'll see when he goes to America to become the private secretary of Thomas Edison,

I think he's 21 at the time.

As such, his job was, hey, we have this gifted inventor now systematized all the businesses

around him.

So that's exactly what Insul did.

And he's going to wind up working in that industry for the next 53 years.

But when he's a young boy, he's reading, they would call them self-help books.

In fact, one of these authors, this guy named Samuel Smiles, that Insul was reading about,

actually wrote a series of inspirational books that we'd call self-help today.

In fact, one of them, so it's like a combination of self-help and like a biography.

So he's like reading biographies of lives of great engineers, but one of the actual titles

that he read and had a huge affection on his life was a book called Self-Help.

And these books in their day sold a ton of copies.

So it was like, they inspired thousands of young English men with this idea that if you

had exercise lifelong learning, self-discipline, and honesty and thrift and prudence, then fortune

would follow.

And so he would take some of these lines.

He would have these maxims that he'd repeat.

And he would repeat them throughout his life ever since he was a young man.

So I just want to list a couple of the ones that stood out to me.

So the first one is, idle hands are the devil's workshop.

Number two, time is money.

Number three, things are simply done or not done.

Number four, one reveres one's family.

Number five, only that which is useful is good.

That reminds me of one of my favorite Thomas Edison quotes.

He says that sale is proof of utility.

Edison was famous for only wanting to invent things that had actually a commercial application.

And his whole point is like, you know what's useful because people will buy it.

Sale is proof of utility.

So again, only that which is useful is good.

And six, survival of the fittest.

And so Sam's first job, he's 14 years old.

He gets a job at this firm of auctioneers and he's just an office boy.

Basically having to do whatever it is they need done.

Just like Carnegie before him and Rockefeller received.

So whenever again, it'll just start acquiring all these skills.

They make him more valuable to the company, even at a young age.

So Rockefeller would learn bookkeeping, Carnegie would learn how to be a telegraph operator.

Insel's version of that, he becomes a stenographer.

And just like Carnegie, who would stay up late into the night learning how to be a telegraph

operator.

He was doing the exact same thing.

He says he worked out a long into the night every night until he had become an expert

stenographer.

The other night I was having dinner with two founder friends and we had, we were having

this very interesting discussion on Sam's L. And actually went, it inspired me the next

morning to go and reread all my highlights from Sam's L's autobiography.

And there was a description of something Sam was doing early in his career.

Might have been one of his first projects where he was building on a student housing and

Michigan from Namastegan.

And there was a note I left myself that I had forgotten.

And it says, do the best you can with the opportunity in front of you.

Opportunity handled well leads to more opportunity.

So he becomes a stenographer, realizes, hey, this is a very very skill set.

These older, more successful businessmen are in need of it.

So I will not just learn it, but I will spend nights and weekends becoming the very best

stenographer I can be.

He's like 15 when he's doing this, right?

And as a result, his boss at this auction, auctioneer company actually knows the editor

of the founder and editor of the magazine Vanity Fair.

And he needs help.

His name is Thomas G. Bowles.

So he actually needed a person to come at night and be his stenographer.

And so because Sam did the best he possibly could with the opportunity that was in front

of him, and opportunity handled well leads to more opportunity, he winds up being a very

close and important night time employee for this well connected and powerful founder and

editor of Vanity Fair.

And so if you think about this, Sam and Soul, this point is a PSD, which you and I've talked

about over and over again, poor smart determined.

He doesn't, he's not connected to, he doesn't know high finance, high business.

He doesn't know the most powerful people in the country, but Thomas Bowles does.

And now he is at the right hand of Thomas Bowles.

So he says, Bowles was intimate with many important politicians and able to gain entrance

almost anywhere through his personal and family connections.

Insole would go to Bowles home or nights a week to take dictation from eight until midnight.

He would see what he would have something to insult was was famous for.

Remember, they said he had demonic energy.

He said sleep was unimportant.

So he would arise at four the following morning, right?

So keep in mind, he's working all day.

He's got a full time job at the auctionaire.

All right.

Then he goes and works for Bowles from eight until midnight.

Many sleeps for four hours, wakes up before in the morning, transcribes all the notes that

he took for Bowles and then delivers that to the printers on his way to his day job.

Now this is very important because when you and I talk about this, relationships run

the world.

And so the way that Sam Insole is going to build a relationship and really probably the

only path to build a relationship with extremely influential and powerful people that can help

you, right?

It's service first.

He's not like, Hey, give me, give me.

Let me go pick your brain.

No, it's like I'm going to work excessively hard for you.

I'm going to provide a valuable service for you first.

And as a result, Thomas Bowles teaches him about the highest end of business and politics

and finance and more important, maybe, maybe more importantly, you're just as importantly,

maybe so we think about this.

Sam starts to become very comfortable around in the presence of very powerful people.

And so now Sam starts to see, Oh, this is a path to advancement.

What does he do?

Well, I'm just going to keep, you know, being an office boy and keeping a stock, a

sonographer.

He's like, No, I need to acquire more skills.

So then he starts to teach himself bookkeeping.

He winds up buying a bunch of like essentially almost like a course is where you could think

about this that would teach him bookkeeping and accounting.

And then he starts keeping an imaginary set of double entry books to practice.

Then he's reading every experiment in the day.

And it's not like this guy has a lot of spare minutes, right?

He devired classic works in political economy, history, literature, and biography.

He had the ability to commit to memory everything he read.

He also had the ability to focus, which is again, is I think is becoming even more and

more rare in the world, the modern world that you and I live in today.

Says he developed the ability to concentrate on a single, single subject and to completely

shut out everything else, no matter how pressing.

He learned to systematize and render efficient whatever he dealt with.

And so that is a hint to what is probably his greatest skill in operating businesses.

He would bring him in from other companies and just like he could come into your company

and just build systems to make every single company he was involved in.

He found ways to systematize and to make it more efficient.

Without that skill, you and I would not be talking about him today.

This book would not have been written on because essentially what like his main achievement

is that he developed right the business model for the modern electric industry.

And he winds up he does this by turning a luxury product into a necessity.

His like flagship accomplishment in life, him more than any other person in history made

electricity universally cheap and abundant.

What blows your mind is when you go and read these books, especially like this Robert

Baron era, it's they essentially had a very similar idea, even if they didn't put

into words is like how do we turn a luxury product into a necessity?

Okay, so I want to fast forward a few years.

Insul is 19 and he still has this habit of reading and then using the best like absorbing

as much useful information as possible.

He winds up coming across this article that talks about a 31 year old American inventor

named Thomas Edison and Sam and so is blown away.

And after putting that article down, he goes and finds every single possible thing he can

find on Thomas Edison and he reads it all in doing so.

Edison becomes insul's hero and a 19 year old Sam and so does not know he's about to get

fired for no fault of his own.

He doesn't know this is going to be probably the best thing that ever happened to him.

So his boss that he's been working there for what four and a half years gives insul a review.

He's like, you're incredible.

You're diligent and unfortunately we have to fire you and it's like, well, what's going

on?

They're most important customer that was spending hundreds of thousands of dollars a year

and that's in the 1870s, 1880s.

Once his son to enter the business.

So he's got essentially insul gets fired because the company he's working for, the most

important customer, the son needs a job and that job that he gets was formerly done by

Sam.

Insul.

And as you can imagine, he's crushed.

He's humiliated.

He's somewhat depressed, but he doesn't stay depressed for long.

He's like, okay, I got to find another job.

I got to support myself and he winds up getting a job.

His new employer was this guy called Colonel George.

Why did I say this?

Probably the most important thing that ever happens to him because Colonel George, it was

the European representative of Thomas Edison.

This is one of Thomas Edison's companies.

This is not has nothing to do with electricity yet.

This is when he was making innovations in the early telephone industry.

So Colonel George hires a young Sam Insul.

He's like, wait a minute, this guy can do everything.

Not only can he be my stenographer, he can be my bookkeeper.

And so what he does is he allows Sam Insul to read every single thing inside the company

about all these contracts and all the businesses that are doing for Edison.

This is Rockefeller to the same thing.

If you remember on the multiple Rockefeller episodes I've done, he becomes like the bookkeeper

at this like produce commission house.

It's called Hewitt and Tuttle.

And what he does is he's like, hey, I'm just going to read through the history, the complete

history of the company.

She goes back and reads all the books and everything about that.

They say by the time Rockefeller was done, he knew more about the company than the founders

did.

You're seeing something very similar in Sam Insul's life.

And so here's a description of that.

He says he went through systematically every scrap of paper concerning Edison that he could

find in the office and he committed most of it to memory.

When Edison's chief engineer, his name's Edward Johnson, when Edison's chief engineer

came from America to London to supervise the installation of the first European telephone

exchange, he found that Sam Insul, who again is 19 at the time, he found that Sam Insul

knew more about Edison's business affairs in Europe than Colonel George did.

And so if you think what's happening is this is really incredible.

Step one, learn everything about Edison.

Step two, build a relationship by serving Edison's chief engineer.

So by this point Edison's already Insul's hero.

Right?

So he's like, okay, I'm going to tie my fate.

He thinks Edison is so special is like, we need to tie our fates together.

How am I going to get a job?

How can I work?

How can I meet Thomas Edison?

And so this is what he says.

He's like, well, to do, I must do two things.

I have to learn everything I could about the technical aspects of Edison's businesses.

And I need to build a relationship with Johnson.

And so how does he do that?

Same way, he's does acts of service.

He doesn't ask for something.

He's like, these people are really important.

I how can I, what can I do to help them?

So he spends every single minute with Johnson's engineers as they're building this European

telephone exchange in London, right?

And he's like, he asked them a bunch of questions, but he'll do anything.

He's like, hey, can I carry your pliers?

Can I help you string wires?

Every single aspect of the business is something that Sam does for his entire life.

He probably knew more.

I mean, he's the one that vertically integrated the electricity industry.

So he definitely did.

He knew just, you knew every single aspect of the business.

It's just his modus operand and whatever he's, whatever he does.

And you see it in 19 in this telephone business.

And so after a few months of this, Johnson becomes familiar with them, right?

He's like, okay, I know who this guy is.

He's obviously smart.

I'll spend some time with him.

But he was also complaining.

This is funny.

Edward Johnson, remember Edison's chief engineer complained loudly about the laziness of

an Englishman who refused to work on weekends.

And so Sam, here's him, say this, he's like, hey, he volunteers.

He's like, I will come to your home on the weekend and I will work without pay.

And so of course, Johnson accepts.

He's like, okay, cool.

And Edison soon, Sam and so is doing all of the secretary work for Edison's chief

engineer.

And Johnson realizes, hey, this kid is gifted.

I need to find a job form.

It says, as Johnson was soon convinced, conceived of the ideal function for Sam Inzel.

Edison was always dog at least systematic and practical regarding his inventions.

But he conducted his personal and business affairs in a slip, shod manner.

Johnson believed that Sam Inzel was just a sort of fellow Edison ought to have around

him as a private secretary and general business partner.

And so by this point, we're 19, what are we?

19, 20 years into Sam Inzel's life.

It's very obvious.

The book has just started.

And there's a great line that Lyndon Johnson had said over and over again that are in the

biographies of Robert Caro.

I also talked about on episode 305 that he did on Robert Caro and LBJ.

It's do everything and you will win.

That's one of my favorite maxims I've ever heard.

Do everything and you will win.

If you heard my episode on the mind of Napoleon, right?

That book is so hard to find.

It's episode 302.

It is obvious when you study Napoleon, when you study LBJ, when you study a lot of the

people in the United States, if they didn't say it out of their mouth, their actions are

showing that do everything and you will win.

Most people will do will not do everything.

And so we see he wants to go to America.

He wants to work for Thomas Edison.

There's no opening yet.

Johnson's trying to figure out how can I get him in and during this window of uncertainty,

this time period, right?

It's not like Sam and Soul.

I think you already know by now, this guy's not going to sit down and do anything.

He wakes up with demonic energy.

So this is what he did.

During this wait, he was neither idle nor waiting.

He reread every one of Edison's European contracts and then took it upon himself to

write weekly letters to Johnson, summarizing the fluctuations in the telephone situation

and outlining Edison's shifting interest in connection with it.

These letters prove to be the best selling points Johnson could have in recommending

Insel.

And when Edison's private secretary suddenly resigned, Insel was on his way to New York.

Now this is incredible.

Everybody around Insel's like, you are insane because he's like, all right, I'm out of

here, guys.

I'm going, I'm jumping on a boat and I'm going to America.

And they're like, what are you doing?

What's your job?

He's like, I don't know.

There's no job description.

What are you getting paid?

I don't know.

You have all of his family and friends like, you're nuts.

You can't go.

You don't even know what your job is.

You don't know what you're going to get paid.

And you're going to get on a boat and go across the Atlantic.

And this description of Sam Insel's one of my favorite ones in the entire book, doubting

yourself is very, very dangerous, something that's come up a bunch.

Do you have been swayed by such objections?

Such objections would have been completely out of character for him.

One of his most deep rooted traits was that he was absolutely unable to imagine the possibility

of his own failure.

He entirely lacked the sense of caution of those who doubt themselves.

Caution, like relaxation, was unnatural to him.

Insel gets on the boat, right?

He gets on the boat.

He lands.

He gets in New York, you know, this after a few week journey.

He gets in New York.

It's nighttime.

The sun had just set.

Johnson meets him there.

He's like, hey, we have no time to wait.

Like, we're pushing, right?

We're pushing the pace here.

He takes some straight to where Thomas Edison's at because at this point in Edison's career,

he had just completed his successful experiments on electric lighting.

So this is when he closes, temporarily closes Menlo Park, moves to Manhattan.

He's getting financing from JP Morgan and he's trying to build out.

This is direct current, right?

So this is the very early days.

I mean, it is the earliest days of the electrical lighting industry.

And again, going back to this idea that there's something that happens over and over again,

can you turn a luxury product into necessity and you do that by making it universally cheap

and affordable for everybody else?

They knew what they were trying to do because in Seoul, Johnson and Edison said things

like this, we will make electric lights so cheap that only the rich will be able to burn

candles.

So Johnson brings in so to Edison and they look at each other and like, oh my God, this

guy is so young.

And at the time, this is in so was 21, right?

But he looked a little younger and Edison is just 34 years old.

This is, you know, I'm obsessed with this because I talk about this all the time because

if you Google Google image search, Thomas Edison, you're going to see the old,

like the white hair at Edison, you know?

And this idea, it's like, oh, we get insight and there's a bunch of like super old books

mentioned in this book.

And one of them is like, it talks about like the very early days, like when Edison was

in his 20s and it was written by a guy that was like one of his helpers.

So I just ordered it.

It should be here in like two or three weeks.

It's like very hard to find.

But I'm obsessed with this idea.

It's like, okay, yeah, Edison at the very end of his career, that's fascinating.

He's the, you know, the elder statesman.

He's going on these road trips at Henry Ford.

He's probably the one, you know, he is one of the most famous people on the planet.

This is Edison before that.

This is 34 year old.

Edison's still trying to figure things out.

Now that did not mean that he, what he was already, you know, pretty famous.

And he had a bunch of inventions under his belt.

And so there's this great paragraph I want to read to you from the book because it really,

like, delays some of the fear that insults family and friends.

I was like, you're crazy.

Don't go on the boat.

Like, why are you doing this?

You don't know what the job is.

You know, what you're getting paid.

Work with Thomas Edison.

And so here was Edison's resume at 34.

Here was the man who had invented the stock ticker, the multiplex telegraph, the memiograph

machine, the phonograph and the transmitter that made the telephone practical.

The man who said he had invented and was about to give the world electric lighting, electric

power and electric transportation, the man who would invent in the next decade, the motion

picture and discover the principles that made possible radio and television.

And so of course, if you're a young 21 year old or really any age and you have the ability

to sit to literally be the private secretary, to go everywhere, to be his linchpin to the

world, you of course you do it.

This was a genius idea and risk that turned out to not be there very risky that a young

Sam insult did.

So the first thing Edison's doing is like, hey, I'm having, he's like fighting with

JP Morgan and a bunch of his finance ears.

They won't give him the money he wants to extend his electric conventions.

He's like, I don't, you know, I don't care.

I'm going to, I have to figure out how to do this myself.

Take a look at all my resources, young Sam insult, because remember, he had been writing

there essentially what he's going to do is going to sell off a bunch of like his patents

and licenses for his telephone business as they can you go through this and tell me what

I should do.

Now how would Thomas Edison and Johnson know that he should do that?

Well, remember that insult was writing these weekly letters.

I said, I'm reading every single thing.

I'm reading all the contracts, all your licenses.

I know the lay of the land over here.

This is what you should do.

So the first job he does is he says, hey, listen, Edison tells him,

he goes, I got $78,000.

I need to finance my new undertakings and I'm ready to sell everything that I own.

And the most valuable thing that Edison owned at this point that he believed was his European

telephone securities.

So the first job is insult has to go through all of this paperwork again and say, okay,

where's the best place that we can sell the dozens of, and they have all these different

securities, different kind of securities.

We have dozens of these.

Where do we go?

How do we do this and how much do you think we could make from them?

Remember, this job is starting the first night that he gets there.

Let's say the sun sets, this is in February, so what time would the sunset?

Maybe we have five in the afternoon, something like that.

He works all the way through the night.

By four in the morning, he had gone through every single one of these transactions and

had a plan on how to distribute them and sell them for the highest possible price.

Edison's like, okay, this is the guy.

So he goes, hey, what do you want to make?

And in so it was like, I don't care.

Just pay me whatever.

And again, think about that.

Pay me whatever I'm going to prove my worth to you.

And then it's not like Edison had, Edison's not organized.

So if someone asked, if someone was to go back in time and ask, Sam, hey, what were you

doing for Edison?

Whatever was necessary is the answer.

Whatever is necessary.

And so there's just one paragraph I want to read to you that describes this.

He's systematized Edison's office without attempting to systematize Edison's own activities.

Edison's whole method of work in so later recalled would upset the system of any business

office.

He cared not for the hours of the day or the days of the week.

And so we'll talk about it.

It's not like he had a set schedule, right?

He would work on whatever he thought was most important or most interesting at that time.

And so sometimes it's he would talk to all the people in the staff for two or three hours

about an invention or a thought that he had the night before.

Or he'd spend two or three days in a row trying to say, Hey, I just got, I just created

something.

Now I'm going to spend two or three days just running experiment after experiment with

as little sleep as possible to try to push this idea into some kind of practical application

as soon as possible.

And then once you figured like you saw the problem, he would hand it off to somebody else

to turn it into a product.

But there was no like organization or rhyme or reason to like the way Edison spent his

time.

And there's a great description of this a few pages later where it says systematic is Edison

so well, versus Edison possessed a colossal ego, of course.

But systematic as he was when pursuing his own ends, he had an almost pathological hostility

to any form of sister system order or discipline imposed from without.

So the mandate is clear, build a business around me, systematize that business, do not

try to systemize the way I spend my time.

I do not want input from others on how I'm doing that.

And so I mentioned earlier, I really think of Insol and a lot of the like Carnegie and

Rockefeller and Ford, they're definitely company builders, but even more bigger than that,

they're industry builders.

And so, Insol was the same way because remember, Edison's going to give up on electricity.

Insol stays stays with it for his entire life.

He works with, well, let me just read this line to you.

Says that was to be Insol's job for nearly 12 years with Edison and 40 years thereafter

to make Edison's system work.

And so why do I say it's really industry building?

Because listen to what they have all the things they have to invent that you just wouldn't

if you're not building an industry.

The inventions, the electricity inventions could not be immediately used with existing devices.

So to make his electric light usable, Edison and Insol had first to invent every component

of an electric generating and distribution system and then create the manufacturing industry

to make them.

Engineering organization to install them and essential station industry to buy them.

Hundreds of minor parts of a complete electrical system had yet to be devised.

They had to develop practical switches, sockets, cables, junction boxes, wires, insulators,

fusers, meters, filaments, voltage regulators, and scores of other devices.

This is company building on hard mode because it is industry building.

So the great thing about Insol, especially from Thomas Edison's viewpoint is like you

could just drop him in anywhere.

It's like, hey, there's a problem over here.

Just go fix it and then you can just know that he's going to fix it without having to

think about it.

So this is where he drops him into the company that eventually becomes general electric.

Now what's fascinating here is the value transfer that happens between Edison and Insol.

And the value is not in money.

Insol's not making a bunch of money.

He's 25 years old at this point.

But he is building a world class network and then like price us experience.

So he's going to take this network and experience that he builds or that he picks up working

for Edison and then apply to his own business a few years later.

But I do want to point out because it's kind of crazy is like how much time I had spent

with this book.

So first of all, the book is not easy to read and it's not because it's bad writing.

It's because there's so much, it's so high like information dense and there's so much

going on because in so it's going to wind up having hundreds and hundreds of companies

and it's very complex structures.

So let's say the book is 350 pages.

It's not.

It's probably 700 pages because I had to reread several pages multiple times.

But what is happening is while I'm reading the book, I forget like the intro is, hey,

this guy, the subtitles, the rise and fall of a billionaire utilities, I couldn't, he

is so gifted and has such great ideas that I had to remind myself over and over again

while I'm reading this book.

This has a terrible, unhappy, disastrous ending and you just cannot believe and that's

why I think it's really going to resonate my brain and why I want to talk to you about

it is because it doesn't matter how many great decisions you make throughout your 50 year

career.

If you over leverage yourself, you can ruin your entire life work and you can die with

no money and know like all your accomplishments wiped out.

So I'm going to get to that in a minute because you see his fatal flaw that barring, excessive

barring and excessive leverage just became this deep rooted habit with him and you'll see

that because he's going to mention a minute.

So this is all the stuff that he's accumulating just in the short four years.

So now I fast forwarded four years in story, it's only 25, but he's met virtually all important

figure figures in the business world.

He had accumulated a bunch of experiences which would ultimately prove very useful in the

business that he's going to set up and run for the next 40 years after that that he knew

everybody who was anybody in the electric business.

He had picked up firsthand knowledge of urban politics on a depth and a scale that was

rare.

He had learned enough about manufacturing, selling, promoting and administration and organizing

and he had also learned the meaning of credit and what it could do.

Barring became a deep rooted habit with him.

He would say never pay cash when you could give a note.

So I just want to pull up a couple of things that came to my mind.

They all come from Charlie Mung and Warren Buffett when I got to this part because he had

a bunch of different companies.

One of them, let me just give you the idea of like how highly leveraged he is.

After the great depression, this guy is going to wind up barring like another $200 million.

Again, he had gone through a bunch of, this is a very difficult part about this.

He had gone through a bunch of different financial panics.

He didn't really believe this is his fatal, one of his fatal flaws is to say he didn't

believe the great depression was anything different.

He's like, oh, I've been through a bunch of financial panics.

Everything will be fine and will be back in like a couple months, a couple of years.

And so he literally called to the White House with a bunch of other, a bunch of other like

prominent American businessmen and Hoover's like, oh, this is just, you know, just conduct

business as usual.

Now all this falls, the weird thing is when you read about insulin in the biographer too

and I watched a couple videos on them as well.

They all like, oh, it wasn't his fault.

This is a great depression.

No, no, no, it's always, it's always the founders fault.

It doesn't mean he was, I don't think he committed fraud.

He winds up being, I'm not even going to talk about that.

Later on in the book though, he winds up going to trial.

He beats every single trial.

From what I, my reading of this is very hard to tell.

I don't believe that he did this.

I just thought he made a bunch of terrible, terrible decisions that had way, way, way

too much leverage.

So I'm getting ahead of myself.

Let me just read this because this idea came up to it's like, oh, never pay cash when

you can give a note.

And so what I did is I went to founders notes and I searched leverage.

And specifically this note that I had in my mind on the dangers of leverage.

And the fact that this is coming from Warren Buffett's shareholder letter.

And he says like, most people won't heed his tree's warning.

So I just want to read because this is essentially exactly what happens very similar to what happens

to Sam Insole.

Warren Buffett says, unquestionably, some people have become very rich through the use of

borrowed money.

However, that's also been a way to get very poor, which is exactly what happened to

Insole.

When leverage works, it magnifies your gains.

Your spouse thinks your clever and your neighbors get envious.

The leverage is addictive.

And he was addicted to it from a very early age.

And maybe you had to.

I'm not like again, I'm not sitting here all I wouldn't have done this if I was him.

I would never have that like highly likely that Sam Insole smarter and more talented and

more accomplished than I am.

And so it'd be very arrogant to think that if I was presented in the same situation,

I wouldn't have made his same decisions.

The point is like we need that we're learning from history because Hitler as a monger said,

learning from history is a former leverage.

It's to know this shit.

So oh, I don't do this if I remember presented with that opportunity, right?

So I want to be very clear, when leverage works, it magnifies your gains.

Your spouse thinks your clever and your neighbors get envious, but leverage is addictive.

It seems that he was very addicted at an early age.

Maybe had to be.

I don't know.

Once having profit from its wonders, very few people retreat to a more conservative practices.

And to repeat, as we all learned in the third grade and some relearned in 2008, any series

of positive numbers, however impressive the numbers may be evaporates when multiplied

by a single zero.

Every tells us that leverage all too often produces zeros, even when it is employed by very

smart people.

It's impossible to read this book and not think that Sam and Soul was very smart, right?

That is the danger.

That is why it's going to latch on to your and I's brain.

It's like, oh my God, this happened to him.

I need to avoid this.

Leverage of course can be lethal to businesses.

Companies with large debts often assume that these obligations can be refinanced as they

mature.

This something happens in soul.

He was guaranteed.

Don't worry.

You have unlimited credit.

And then the bank said, oh, you don't.

You're going to run it.

He's going to take the job.

When he's leaving, he says, let me get there.

I'll skip ahead real quick.

He gives us toast.

He says that one day he's going to make the Chicago Edison

bigger than General Electric.

Everybody else except him laughed.

He was not joking.

He believed that he was going to do that.

It says the job opportunity, if you took it,

would be bound only by the limits of his own ability and ambition.

I don't think he believed he had any limits on his ability

and his ambition.

He wasn't going to actually offer himself up for the job.

He's actually having a conversation with his mom.

He's like, I would take the job, but they're asking me to help them find the best possible fit.

His mom's like, what are you talking about?

You should do that.

She goes, they asked him and his capacity with the GE

to recommend the best available men.

Did they not?

Well, then was he not the best available man?

He was the best available man.

He should sit right down.

He believed that he was the best available man.

His mom said you should sit right down and write them a letter saying so.

He sends the letter back and they're like, oh, yeah.

I didn't even know this was a possibility.

Yes, please take the job.

He accepts the job and then he says, hey, I want you to do.

I have one demand.

You need to issue $250,000 in new stock.

Remember the stock market cap is $885,000 at the point.

They take the job.

He says you need to issue $250,000 more in stock and you need to sell it to me to buy the stock in so borrow the entire sum from Marshall Field,

who is this older successful entrepreneur who in his old age figure that the best possible place to invest money was in bright young men.

So we still see the exact same thing today.

You have, you know, widely successful people Jeff Bezos is still making investments.

Right. And what is he doing? He's like, the best possible place to invest is probably in bright young entrepreneurs.

And so we see the same exact thing, the same thing here where Marshall Fields, like, yeah, I'll load me the money because this is a great investment for me.

And so this is the point in which in so goes.

And this is what he's going to.

This is his starting point for the next 40 years.

This is he's going to turn this company and other companies into this giant holding company can glomerate whatever you want to call it.

And it's going to be phenomenally successful worth, you know, a couple of billion dollars right before collapses.

And so he comes to Chicago and he's like, hey, we're going to invert the way other people think about electricity.

We're going to try to make electricity cheaper, not more expensive.

And to do that, I need the largest possible base of customers.

And so we have to aim for a monopoly.

Now, you and I know today, like utility companies are something like I can shop around.

I go, I want my electricity.

They're their government mandated like a monopolies, right?

That was in sales idea.

The world we're living in was influenced by this guy that we're you and I are talking about.

So it says, insult was thinking differently from the others in one vital respect to most others monopoly was desirable because it would enable them to charge higher prices and thus make more money to insult it was imperative because it would enable him to build on a broader base of customers.

All of his thinking was therefore inverted.

Their thinking was based on the premise that electricity should be considered a luxury product.

And that should be sold at the highest possible price.

Insel's thinking was based on the premise that electricity should be considered for everybody, even the smallest consumer and that for able to fulfill that goal, it should be sold at the lowest possible price.

And it is for that reason that insel set out to do to build a monopoly before it was mandated by the government.

And you see this at the very beginning because the very first meeting he has with the executive committee for this new company Chicago Edison that he's taking over.

He's like, all right, we need to buy our second largest competitor and so they help raise the money and they do that three months later he goes, okay, now we're going to buy our biggest competitor and those first two moves.

Now this is why key I know I've repeated this a lot why he you can really think of him as like the one way to think about is like the Rockefeller of the electric utility industry because Rockefeller believe that too.

He's like, listen, if you're going to you're competing with a bunch of people, let's say you have 20 competitors don't go for number 17 and 18 go for the top try to knock out the first guy.

In this case, he insel knocked out the second guy and then the first guy because it's like if you can achieve that, then the rest of them follow follow.

And so after the combination Chicago Edison and his two largest competitors, he is running at the time the largest electric power station in the world and he would continue to do so for the next 40 years.

And another thing that he had in common, this is why like I always say the most important lesson for his entrepreneurship is the importance of focus.

It's not like this guy was like, hey, I know more than anybody else in the world about the electric industry.

Let me go diversifying to something else like why would you do that? He understood the potential of his industry in a way that others did not.

You could say the same thing for Rockefeller and oil like Rockefeller is the just pops up off this page over and over again.

I think of Edwin Lann when you know he created the his the his the like his invention created his industry, which then he had him on opalion for 40 plus years.

He's like no one else in the world because we're patented protected can make instant photography and you want me to go make a copier and you want me to go make a printer.

There's just many examples where he's talking to people inside his company's like no we're only going to do things that other people cannot do.

And that is just one of the main main benefits of focus and so what is he do one of these early decisions is like he's buying the electric electric generating companies.

But then he goes and buys for Wayne and Chicago arc like companies why is he doing that this is his first step in vertical integration because these people are manufacturing electrical equipment that the people generate these generating plants need he's like I'm going to buy this company because all the other smaller companies of him have to go to these companies to buy stuff they need.

And listen to this is going to be Rockefeller to this policy quickly paid off caught between bad times and difficulty even in buying replacement light bulbs six of the small central stations in Chicago gave up in 1894 this is the cleat this is Cleveland massacres win in like couple months.

I think rock though swallowed up what are like 17 or 25 of his competitor smaller competitors or something this is something it's very similar.

This is happening here in Chicago in 1894 and 1885 these all these six smaller stations sold out to Chicago Edison so he knocked off to then he knocked off or knocked off the second biggest competitor then he knocked off the first now that company combined with those three companies right he's the biggest player in town now these found found way to get

six other smaller people to sell to him so they sell they sell to insult when he won in so was always generous to the losers paying them more for their plants and they were worth Rockefeller did the same thing this is incredible.

This was not this was not him being benevolent but good business this is a great line into recognize that while money may not buy friends it will keep many a man from becoming an enemy and people while they're watching him do this like this is dangerous you shouldn't do this this is a little boutique.

You know this is a tiny little business what are you doing it optimists at his time right there like okay how many possible customers can you have in a city of Chicago the most optimistic in the early electric lighting electricity industry right they guess that maybe maybe one day you might be able to get 25,000 customers

like you're spending a lot of money for only 25,000 customers you know what Sam thought that number was he's like well how many people live in Chicago and they're like a million people he's like okay so I'm going to get a million people think about that his guess for how big his market is and he actually shot underneath that he's going to have way more than a million people

think he wants to think his company is just wind up combined producing all the electricity for like one eighth of the entire country's population but think about this everybody around him again this is why I tied it in with focus in the importance of like you if you understand the potential of your industry in a way that others do not why the hell you diversifying into something else just keep going down that curve right because the other people that thought they understood maybe somewhat as much as he did they were 40 times he they're most optimistic projections

were 40 times smaller right then in souls and in souls were even what maybe 10 I don't even know how many people are in the country time this is one eighth and there's a hundred million people in the country that means he was off on his own estimate by what 12 13 times and so look what he achieves is first six years oh and I didn't even mention this is he's doing this during a financial panic so again I think you can learn the wrong lessons from your own experience

for an extra panic I survived them and I even prospered and I'm what's what how different can the great depression be who likes could be very different actually and so he half a dozen years so he's got six years many of these are during some kind of like bad financial depression but not the great depression his company was 10 times as large as it had been when he took it over and during this period so that's 24 consecutive quarters he was able to pay a quarterly dividend of at least 2% 24 times in a row.

And so he's a great understanding of what we would call public relations even though there was no such term as public relations in his day and this is what he realizes is like well guy the bigger I get the more scale I get the cheaper I make memories he's going from an oply so he can make it cheaper and as a result his customers love it they go from you know having to burn you know caracene or candles and now they have electric lights.

And so he's a beloved person in his community he's built a lot of relationships with a bunch of politicians and he has a great line about this so he says more profound than his organizational ability was in so sense of public relations to him the moment of applause was the moment for action the moment of applause was the moment for action and so he's beloved and he goes hey these should be government regulated monopolies that was his idea so he goes he initiates and he brings to successful conclusion the movement for you.

The movement for utility regulation United States and he believes this is necessary because he believes that you have to expand you have to spread all your cross your fixed cost over the largest customer base is possible this is the most effective way to do this some people describe this is regulatory capture and so this push for this like legalized monopoly.

It helps him expand which obviously was what he is goal is is like I have to spread all my fixed costs over the largest customer base if I have a legalized monopoly that's going to the it's the best way the best tool I have to extend extend my customer base now here's the problem too where this is this constant expansion is the way they thought about the constant raising of debt if you go back to what warm buffets that earlier companies with these large debts often assume that these obligations can be refinanced as they mature that assumption is usually valid.

Occasion though either because of company specific problems or worldwide shortage of credit which are too much actually we met by payment and for that only cash under the job when that happens to insult he doesn't have any of the cash and so he loses everything but the way they looked at it was hey we to expand this new industry we need vast quantities of debt capital and it says a lecture companies like modern governments borrow money that they that they cannot and do not attend to repay except by perpetually refinancing they are not going to be able to do that.

They are borrowing money that they do not and cannot intend to replay expect except by perpetually refinancing and so this constant need for more money that's ever present because he's guy never stops expanding it actually leads to the invention they credit him with the invention of the open ended mortgage and that's the I think the main like lesson here is the way you position and frame things actually matters and it can actually get people to comply with your quest.

For something that they previously declined and so he goes to the to the board of the executive committee and he says hey I need a hundred million dollars and bonds this is 1896 and like are you crazy what is 100 million dollars and bonds and a year earlier he had tried to get them to do 6 million dollars so this is like again how fastest guy moves and like how his ambition is and his scale like think about that last year he goes to them he's like I need 6 6 million dollars and bonds they said no comes back to the

back and actually goes okay and he said no on 6 million but I need 100 100 million bonds and they tell him no again of course and so he wants to talk in a friend of his who actually had a lot of experience in financing the early road in the United States and they had this idea he goes hey you're going to have a hard time convincing your your your board to accept that I have a way you can like reposition this he says why don't you ask them for a mortgage with no limit and he says a mortgage or no limit might seem much smaller more conservative than one with a limit of 100 million dollars.

And you sound like that sounds crazy how could that possibly work in so proposed to them a mortgage and no limit and they accepted under this mortgage in so would issue half a billion dollars in bonds before he was through so you come and put a number on it that 100 that 100 million scares the crap out of them then you said hey I just actually have this open it mortgage I'll draw from it you know a little

by little where the case is they accept it and then over the long term you actually get five times the amount that he actually want that they initially did not approve and this is where this is the interesting thing he was describing to other people like when he's raising capital on the people inside of his company like what is he doing and he called it massing production according to this book they say he is the one that came up with the term mass production in so soon began describing what he was doing as massing production as think about as a massing production right a phrase that his

publishes sort into mass production long before historians mistakenly ascribe that term to Henry Ford massing production turned into mass production.

Another very fascinating idea remember he was a quiz of by nature rates we buying all these companies and what he realizes is like okay well I'm buying them sometimes I'm paying more than

their worth because money is a good way to avoid people being enemies with me right I want people on my side think of a Rockefeller essentially built a company full of founders right he just bought their company and he's like hey you guys are talented come and vice me and then you'll be rewarded standard oil stock now this is

fascinating so he says buying all these new properties like oh wait I'm not only applying scale I'm acquiring customers I'm

acquiring equipment more important that I get talent so he's like aquahiring people back in the day right he would devise methods and he would detect talented

people and if he thought they would talented he would partner with him or buy their entire company and so he said new properties were the most

prolific producers of executives inside of the in sold organization that sounds a lot like Rockefeller another Rockefeller ask

things sell it the lowest price possible sell ridiculously low he sold so low that no one could afford not to have electricity service to win customers in sold sold

electricity and rates so low they appalled other central station men that's like Rockefeller trying to buy you out and you're saying no and he just shows you

your book his books he's like and you're like oh my god this guy can make a profit at prices that would drive me out of business to win customers he sold

electricity and rates so low that they appalled other central station men now he is building a public utility so he's going to need an

advanced understanding of public relations and he understood that you must craft the story and you must educate your customers so there's three separate

examples I think I'll go together that talk about this advanced understanding of public relations and I think there's just a lot of good

ideas in here and so it says he displayed a an advanced concept of public relations I care not he said how good you operate he's how

able maybe the management of your property so he's talking about to all these he's got I don't know 150 subsidiaries it's this is where it's so

complicated and I think led to his downfall was how complicated is organizational structure and how many different entities were involved or how good your

engineer may be and how perfect your plans are unless you can conduct your business as to get the good will of the community in

which you are working you might as well just shut up shop and move away he's talking about public relations convince that the vulnerability of

utilities derived from a lack of popular understanding in soul attempted to educate his customers he began making public appearances at every

opportunity he was instructing employees in public in public relations he established an advertising department which soon expanded into one of the first

full-fledged public relations departments in existence he published a magazine called electric city and distributed the magazine free of charge by the

tens of thousands all over Chicago but he said by far the most effective device in soul had for winning the over the public was rate cuts this is

exactly what Henry Ford did later on his career when the model T was up running up and running he stopped he effectively was able to stop paying for any

advertising because all he did was try to route out any inefficiency and any waste and just keep making his his automobile manufacturing plans more

efficient thus allowing him to drop the price of his car and so every time you drop the price of the car it would be picked up in the

newspapers and that made him beloved because you know this thing that you just cost 6,000 not $6,000 only be available for the rich I can buy for

$250 so again the most effective device that in soul had for winning over the public was rate cuts the cuts were simply good

economics but they also created immense publicity just like I just write for Henry Ford immense publicity value who would ever heard of a public utility

voluntary voluntarily cutting its rates he hits on that idea that you need to pay attention to public opinion these are your

customers this is very important to you the customers obviously he's heavily regulated so also influences the customers are also voters for from in soul's

position the task ahead was thus one of swaying public opinion and at a time when public relations and mass selling

their infancy in this are in soul had few peers and so they make the point later on the book it's like listen say there's 50,000 people who

understand a necessity of the service that you provide right but there are a hundred million Americans that have not even thought of it he says our task is to see that the

figures are reversed right so 50,000 people that understand the importance of all the work it goes into what we're doing but there's a hundred million those hundred

those are potential customers we need to reverse that we need to make the people that understand and in our customers ours the majority and one way to do that is to one make your product as valuable as possible like yes the value to cost ratio

excessively high right but also tell them what goes into making and delivering the service that they enjoy so he had later much later on the book he has these two rules they say there's a concise summary of like his principles of public

or public relations and this is now in soul writing right says practically everything that a public utility company does affects the relations between the company and its customers and anything it does is therefore an item of public relations the first objective in public relations work

is to produce the best possible service at the lowest predictable rates why because that is of the greatest interest to the public

and then once that's taken care about leases to the second the public is in no position to judge service and rates when it knows nothing about the multitude of details involved in furnishing the service so

let me read this finish reading this hence the second objective in the public utility industries public relations work right is a public well informed on the tangible details as well as the social and industrial significance of an of the industry in all the

transportation what is he saying this exactly what David Olga be said in the 1960s what Claude Hopkins said in the early 1900s 1910s which is apparently salmon so had derived from his own experience you need to tell your customers what goes into making your product it may be normal to you because it's your everyday thing it is not normal to them

and if you explain and you educate your customers they will find it fascinating and as a result they will it will make the service and the product you you provide more valuable in their eyes that is absolutely incredible he understood that at the time in which he did so this is the end result of his career before the collapse right by the time it was over electric power would be so abundant and cheap in the United States that people who had never expected to use it found it as natural and as necessary as breathing

so there is going to be a ton of regulation that is put into to law after the collapse of his empire there's a there's something that takes place that I have to tell you that shocking to me might be shocking to you every employee of in souls companies were stock salesman so what is that mean like the employee that would come and check your meter would also like knock on your door and try to sell you stock in the company.

This is crazy he would see his personal personal portion increase from around $5 million in 1927 to 150 million in 1929 and then tumble by mid 1932 to zero and below to a net indebtedness so large that is one banker put it he was too broke to be bankrupt with him went hundreds of thousands of stockholders who shared his money with him.

Who shared his faith in his own in vulnerability and so they set the context where I can see a lot of people like sent you say hey you know and so it was like.

This is a macro economic environment is the great depression is kind of out of his hands yeah but it's your choice to take this like this is when I read this paragraph is going to sound very familiar like you know we've gone through many times were like credit money is essentially free and that was happening in the late 1920s and so you have all these bankers they come up to him and they they try to like essentially just fit.

They delusion him with easy credit and they really in many cases like beg him to accept it for any purpose and so one of the banks that's going to write up screaming over later because they like all the money's there the money's there real back you and then they want to blues in their ass so they can't back him is cut in a bank and they would come up to him and they're saying hey just so you know if you fellows ever want to borrow any more than the legal limit all you have to do is organize a new corporation and we'll happy lend what we'll be happy to lend you another $21 million.

They said that a party like you just like please take 20 like set up another company doesn't know matter if you know what you're going to do with the money yet let me just let me why let me why are you let me send you this 21,000 21 million please.

Another banker Mr. Insel isn't there something you could use our $10 million for anything anything something just let us give you $10 million and so at the same time this is happening there is a corporate rater by the name of Cyrus Eton who is starting in late 1920.

27 and for the next several years he's so begins buying a large blocks of stocks in Insel's company since he's got three main companies and this is where the story gets really really really confusing.

Somewhere between 1920 and 1929 in so realizes that he did not control enough stock and is operating companies to prevent a takeover and so he creates two investment companies through which he could control the utilities and that may have been the case if it wasn't for the great depression but those become over leverage.

And as the prices go down he keeps having to put a more and more collateral will get there in one second so I'm going to give you like a brief overview you have the great depression and again like without these actions after the depression he is companies could have survived you know it's not like you're going to cut like you're going to cut your electricity unless you absolutely are in complete dire situations.

But it's what he does is like how much money and debt he takes on after like dirt in the big after and the beginning and through the great depression this is I don't have any words to describe this I don't understand this I don't understand how somebody so smart and so accomplish and with so much experience does this.

So it says then came the great crash in October the first thing he did was go to the rescue of his employees who were caught with margin brokerage accounts by supplying him from his personal portfolio whatever additional collateral they needed 10 days later as if nothing had happened.

10 days after the crash in October right black Friday or black Tuesday rather sorry not black Friday and black Friday's the sales.

Okay so black Tuesday so the October 29 1929 10 days later as if nothing had happened he proceeded with the long planned opening of the police.

New civic opera house he undertook a huge new venture of of a construction on a natural gas pipeline that he was running from Texas to Chicago that is a project that one project alone would cost 80 million dollars remember this is 80 million dollars 1929 dollars.

Okay what he did next would suggest that he was possessed of delusions of grandier supremely confident that this depression would be there neither longer nor more severe than those he had weathered in the past he expanded far more than turned out to be prudent he returned to debt financing and he bought Eaton's holding so that's that corporate.

Inso's company spent 200 million dollars on capital investment during 1930 most of that is debt so 200 million times that by 20 to get a rough estimate of today's dollars and he did that in one year.

I don't understand this every page I'm like why is he doing this why is he doing this is a no so leave myself and then I get to this point like this is a 50 year successful career destroyed.

This is terrifying to me and so people around him were shocked that he was willing to take on more than 200 million dollars of new debt in the wake of the great crash is reminded me of if you listen to the episode that did on 10 Turner it's episode 327 he winds up getting having to get bailed out by john Malone and john Malone says something in that book that's that I think applies to.

Sam in soul john Malone describing Ted Turner says he took his leverage to high and the structure of the leverage was a problem so he spends at 200 million debt right then he's got a buy out this corporate radar they agreed a $63 million transaction goes back to the bet to the bank right and then they pull four times in the month of May and June in 1930 the president

of the president of continental bank said that they'd be behind him all the way four times in soul refused then he came back a fifth time and in soul said yes he says the only way to finance this purchase was through bank loans secured by the stocks from his two holding companies so six 50 somewhere between 56 and 63 million dollars more of debt right secured by stocks from his two holding companies they get the Chicago can he's usually dealing with Chicago banks at the time then he has to go to New York he hates it.

He has to go to New York he hates the New York bankers he has to go to New York because Chicago can't fulfill this right and he says the various loans were extremely complex what did john Malone just say about Ted Turner he took his leverage to high and the structure of the leverage was a problem this is exactly what's taking place in Sam in soul's life and career at this point and he's doing this in a market that's dropping like a stone each drop in the market would force the investment trust to put a more collateral against their bank loans if the market were driven down far enough the bankers would have as collateral the entire portfolios.

So the whole portfolio of in soul's company with that control of the whole in soul empire and so as this is happening what do you think the reaction is they keep buying they ignore their ignorant of the danger and so this is what they were doing in essence they would buy up in

the next exchanges and then try to sell as much as possible and small lots through their secondary market which is like the customer ownership and then the guy that is doing this for in soul said very so this it's very simple he said you can't go on buying your own stocks forever sooner or later you run out of money in spite of everything he knew in soul could not as late as mid summer 1931 bring himself to believe that he was in serious danger but he was the end was very near to keep the market up through the summer

they try to keep the market up through the summer of 1931 but in September England went off the gold standard and the New York stock exchange reacted with complete hysteria short sellers spread a rumor that in soul was dead or dying and in that week alone the stocks of his three companies dropped by a value of 150 million dollars

as the market declined they had to put up ever increasing amounts of securities as collateral against their bank loans by mid December the well had run dry every nickel of the combined portfolios of the two investment trusts were in the hands of bank creditors that is a Reynolds wrap the creditors then in turn demand that he resigns on Monday June 6th the deed was done in soul dictated inside papers all day drafting resignations from chairmanship and presidencies and receiverships of six

the odd corporations all afternoon as the orgy of registrations and resolutions went on newspaper man swarmed around in sales door when it was over he emerged his statement to the press was a single sentence well gentlemen here I am after 40 years a man without a job he eventually flees and his extra

and it's extra dotted back to the United States put on trial multiple times beats every single trial they can never prove any fraud I do believe his statement that he made he says I have air but my greatest error was an underestimating the effect of the financial panic on american securities and particularly on the companies was working so hard to build he didn't even understand the danger he was in I work with all my energy to save those companies I made mistakes but they were honest mistakes they were errors and judgment but not dishonest manipulations I do think that's that is true for 53 years for her

for his 53 years of labor to make electric power universally cheap and abundant in soul had his reward from a grateful people he was allowed to die outside of prison he does not live for long the only remaining enemy of in souls was boredom like Napoleon in so was required to suspend his declining years in well fed in activity

for two more years his life dragged on he followed the news of business and politics with keen interest but there was really anyone with whom to discuss these subjects and in so was ill equipped to play the passive spectator on the morning of July 16th in so entered a Paris subway and while waiting for a train he had a heart attack and died his body remained unidentified for several hours and the official police statement reported that he had nothing in his pockets

and that is where I'll leave it for the full story highly recommend getting the book if you buy the book using the links that's in the show notes should be supporting the podcast at the same time that is 300 and 36 books down 1000 ago and I'll talk to you in soon

okay so two quick things before you go number one founders only I'm doing an in person conference for founders and CEOs with founder mentality in Austin Texas March 12th to the 14th if you have not yet applied to go go to founders only dot com that's founders

with an s everything I do is founders with the s okay so founders only dot com make sure apply I'm going through all the applications listed it's limited to 150 slots I'll probably send out like 200 invites and then whoever just finalizes a registration fastest will get

those so if you already applied make sure you check your email emailing I'm sending message in LinkedIn so check both those places and just try to finish your

registration as fast as possible if you have not yet applied there is still time jump in and then every single person that applies will obviously go on the email list in case I fill this one out before I get to your application

and therefore you will automatically be notified I'm doing a bunch of in person events and conferences because my goal is to help other founders build relationships with other founders is been there's two things that I'm asked for the most right is let me get for years I was asked can I get access to your notes and highlights

that's founders notes and then hey can you build some kind of community can I meet other founders that listen to founders how can we facilitate that the way I do this is like I build relationships in person I just think it it helps jump start things

and so anyways there's a bunch of people speaking at this conference that are perfect example of this these people are unbelievably impressive they are very important to me and we built a relationship over the last

three years because of the podcast and so I'm calling in favors these are people that in some cases have never spoken publicly and in other cases speak publicly very very rarely we're not going to be recording

anything this is you have to be there are you miss it kind of thing so if you were interested in doing that if you're a founder or a CEO there be other events that are you

know open to much more people but for the very first one 150 people just for founders and CEOs founders only calm apply if you haven't and then if you see a message for me just try to

respond as fast as possible I'm dedicating the next I'm good this will be done within the next like seven to 14 days maybe something like that so time is of the essence the second

thing is if you have not yet subscribed to founders notes go to founders notes calm and get access to what I believe is the world's greatest and world's most valuable notebook for founders I was sitting here

thinking today as I was listening to this episode because I listen every single episode before it goes out again and I was just sitting here thinking it was like imagine a young

Sam insult right you have something that's super smart super determined super dedicated they he will no matter where he starts in life he's going to make his life a success and so he finds people he admires and then reads every single thing he could find about

them you know Thomas Edison being the best example of that and as I imagine if Sam and so is a life alive today and he had access to founders notes so what founders notes is in case you

know no is for years I have been adding every single highlight and every single note on all the books that I read for this podcast into this app called read wise right and then I've gone for years on

other people's podcasts and I treat about it I link I post a LinkedIn about like read wise the best app I pay for I could not make the podcast without it that is

legitimate people think I say so I'm gonna be like you have such a good memory I promise you I don't it's because I reread and reread and reread same book same highlights over and over again and the reason I'm able to do

that is because this app allows me to put all my notes all my highlights everything on how I make this podcast right all the research and if you really think about essentially sat in a room by myself for eight years

and then I'm gonna be a maniac documenting the best I best and worst ideas from history of entrepreneurship so we can all learn from them right and like Charlie

Munder said learning from history is a former leverage and so for the first few years like it was really hard to keep track of all that and then I discovered read was like oh this is genius

and then for years people are sending me messages like I can I get access to this get access to it and I said no every time like I don't know 1000 2000

I didn't count but is a lot of people asked this and I said no because I thought it was like my secret sauce like oh like what if you get access to in the like

start a competitor to founders I don't think people are gonna start a competitor founders like I realized that was a very like zero some mentality was having and because what

is like I would talk to other founders and like we'd be on the phone they have a problem I was like I would just be searching I bring something up they say something and I search my all of my notes and highlights I'd come up with something it was like really helpful

so well not everybody can be on the phone I like why don't and I do this in person in conversations too in fact I just had a dinner the other day with three other

founders that listen to the podcast and we spent essentially spent like two or three hours just talking about all the

geographies we were reading like Phil night currently is Vanderbilt Steve Jobs I went lamb talking about this and so I pulled out this app over and over again in fact all three of them

subscribe to founders notes so they had it too but in any case I was like oh this is like a superpower this is why it's the most valuable notebook for founders in the world

so it is right now it is I would not sign up and this applies to founders only and founders notes this is only for people that already have successful companies there's obviously no free trial you'd have to pay for it what I consider free

trials like the podcast is a giant free trial is free you can listen to three hundred thirty six episodes as much as you want listen to them over and over again take your own notes whatever case is so what I am trying to build

accessibility high value and I would only do it is I would only do this this is only for people that have already successful companies because those are the people that are going to get the most value out of it because they already have a way to turn that knowledge that's in founders notes into

profit so think about like a young Sam and so or anybody anybody running a company is like hey I want to learn every single thing I can about Steve Jobs so there's a few different ways that I I use founders notes and then

when you sign up you'll get a welcome email and it goes into detail about this so gives you an idea and oh my God I saw preview of the founders GPT that is going to be another feature in founders notes I sign up now because as I had features obviously the price will go up I don't

have a landing page yet so you just have to go off the subscription and do you think like it's valuable if I use I use the product every day so that you tell you something right this this thing is going to be nuts I have so many ideas for it it's going to be incredible

because I'll get there like I'm getting excited so I'm going to be testing it for the next few weeks it'll pop up if you're already an existing subscriber don't worry you'll be notified that when this feature is available I don't know if

you've ever been more excited about anything so the way I use founders notes right now is when you log in right and you sign up you're dropped onto this page and at the very top page it's going to be self explainer

it says search highlight so this is put in any you can put in a name something you're thinking about a problem you're having in your company how do I build a sales team what

you about marketing hiring recruiting advertising anything that pops to your mind you search highlights and it'll pull back every single time that that's been mentioned either in a note or highlight of mine so that is something I use every day so

right now there is no app this is just in your browser so you can use the browser on your computer or your phone I leave I would once you log in just leave it up in your browser I search this thing every day multiple times a day

so that is by far the most valuable feature this is where but like what I again I know it's the most valuable feature but what I think is like excessively special is this thing called the highlights feed and again this is this product is for

think about who I who I had in mind when when I wanted to make this right when I contacted the team it read wise and I said hey both of the founders listen to the podcast I was like hey we should build a product together I want to essentially give people access and see exactly what I see

and I want it to be a new product and I want to call it founders notes so that's that's how this thing came to be and I knew already the people are going to get the most value I've already have a successful company so that's why it's for them so those people also read a ton

right there's a high positive correlation between success entrepreneurial success and reading and so the highlights feed is very special because think about all the other platforms that we're giving our attention right it's like kind of just algorithms throwing things in our face

you're seeing like random posts from you know somebody went to high school with 25 years ago or you know somebody angry about something else and it's just like you know anything that gets engagement

and the way I think about highlights feed the highlights feed feature right it looks like this is what my friend Morgan me my friend Morgan household the best

something author talked about it's a smart Twitter feed is what it looks like our smart Facebook feed and the highlights feed is a random highlights and notes right you go on

and instead of scrolling this is like if obviously the reason I said you should have a successful company because usually you know those people also read as well and if you could read this thing for 10 or 15 minutes a day or whenever you want to really

sometimes I read for a couple minutes I've been lost in here for hours and what happens is like it's almost like a random it's like history is greatest entrepreneurs a random sampling of history is going to

be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing

to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real thing for me to be a real

person of visitation I started by soliciting advertisers who did not employ an agency at all so he's talking about how he started his agency when he's like 35 years old

and the fact is like yeah I can go and say hey hire me and fire your existing agency but I should just do it Henry Ford did and just like go to the people by personal

visitation that don't have any like it's easy to sell somebody that doesn't have an advertising agency already partner as opposed to like getting them to switch to some unknown entity and you'd be shocked at how much like you and you'd be shocked at how much either you didn't know or you

had forgotten here's another one that's that's fascinating that he's talked about this is the book my friend Jimmy Sony he's a good friend of mine now he's the author of this book called the founders which is on the

beginning of PayPal and it talks about how competitive in the end of it's really competitive all at all times but especially during the top dot com bubble how

competitive it was for engineering and they're like really a plus talent and something that musk that help musk out is just like hey I got a lot of my own money in this and so there's the unexpected

benefit of putting so much of your own wealth in helps with recruiting because they're like this guy has I think at the time I don't remember how much of his musk's net worth

but he had a ton I think he got like after selling zip to you know $28 million what is that after taxes who knows 15 million something like that and then he's telling

this guy have 13 million I'm 13 out of my 15 million dollars in this company has to work so there's just these weird ideas that happen and what happens which I've heard over and over again

from a ton of founders is like an idea are comment on the podcast are reading in a book are reading founders notes will go into your brain it'll go it'll go through everything else that's particular to your company on the outside

something unique and usually beneficial to your company so that's the way I think about highlights feed it's like it's very interesting and special

I don't even want to confuse you but almost feel like it could be like a separate app which whatever maybe I'll test that person and see if that it's just it's fascinating it's very very

fascinating and then finally I guess I don't want to talk your ear off books you can go to the book section and just go by books so last last

week I talked about you can go read all of the highlights from Brad Jacobs book and in Brad Jacobs when I was reading about

Brad Jacobs I was really thinking a lot about Danny Meyer and I hadn't read Danny Meyer's autobi setting the table for years but it is

excellent and so then you can go and I think there's what 59 I said no 29 sorry 29 highlights and so those 29 highlights you know

probably take 10 minutes to read and really think about and it's shocking how much you can learn you know just by reading

30 highlights from a book or 44 highlights from a book or 71 highlights from a book so that's a brief overview of how I use Founders Notes

you can sign up invest in the subscription for what I think is the world's most valuable notebook for founders at Founders Notes.com

there are annual subscription so every day the I'm adding more highlights every day the product gets better so if you think about that now you sign up now within the next year

or on another 50 books and probably I don't know 4,000 more highlights the more highlights and notes that are added the deeper the ideas go and I think the

context around them only get more valuable time so all right that's enough for me if you have not yet subscribed highly recommend doing that I think that is

for sure subscribing to Founders Notes.com is the best way to support the podcast if you want to travel to Austin Texas and hang out with me

for three days is all inclusive that means if you get to get yourself to Austin but then the event is everything is included in the price so the event all the talks

all the lodging all the food everything it is a private I rented out this entire private venue it is is not open to the public the only people that will be on the property will be people taking part in Founders Only.

So if that sounds interesting to you that is Founders Only.com Founders Notes.com both of those links will also be in the show notes. Thank you very much for your attention. Thank you very much for listening to Founders and I got a get going and

I'll start reading again for the next episode I'll talk to you again soon.

[샘 인설: 유틸리티 업계의 거물, 그 찬란한 성공과 파멸의 기록]-[#336 How To Lose A Few Billion Dollars: Samuel Insull]

📋 Summary

서론: 전설적인 비즈니스 몰락의 교훈

1. 인설의 핵심 역량: '악마적인 에너지'와 체계화 능력

2. 산업 건설자(Industry Builder)로서의 전략

3. PR의 선구자: 고객과의 소통

4. 파멸의 원인: 과도한 레버리지의 덫

결론: 역사로부터 배우는 레버리지의 위험성

🎯Key Sentences

📝Key Phrases

📖 Transcript