The man whose life forms the basis of this book was a master of investor psychology.
The match king had perpetrated the greatest financial fraud in history.
The world now saw an epic betrayal, a villain, not a hero, a schemer, not a planner, a
destroyer, not a builder.
Evar became the Judas of the financial markets.
Evar's company suffered a similar fate to his body.
Panicked selling reduced them to dust.
Just in two weeks after the public learned of Evar's death, investigators from Price
Waterhouse declared that his companies were insolvent.
The Swedish committee investigating his construction firm concluded that its 1930 balance sheet grossly
misrepresented the true financial position of the company.
Investigators estimated the loss at 2 billion, more than Sweden's national debt.
The accountants said Evar had treated his public companies as personal assets.
He had wired millions of dollars among secrets of sitarries and arranged for dubious intercompany
transactions.
The details were too complex to unravel.
At first, it was difficult for some people to accept Evar as a fraud.
He had helped Europe avert a financial crisis.
He was a friend and advisor to government leaders, including the American president Herbert
Huver.
At the height of the roaring 20s, Evar Kroger was one of the richest men in the world.
Through an ingenious plan to sell stakes in foreign matchstick monopolies to American investors,
he built up a tremendous enterprise, paying impressive dividends to his investors.
His company was one of the few to survive the crash of 1929.
But shortly after his death in 1932, it became clear that the great financier was not all
that he had seemed.
Driven by success to adopt ever more perilous practices, Kroger had turned to shell companies,
tax havens, off-balance sheet accounting, fudged income statements, and even forgery.
And the Kroger crash that followed bankrupted millions.
That was an excerpt from the book I'm going to talk about today, which is the match king,
Evar Kroger, the financial genius behind a century of Wall Street scandals and is written
by Frank Partnoy.
So there is a pretty amazing story how I came to know about this book and read it this
week.
And last week, I actually got to have this incredible almost four-hour dinner with Daniel
Ek, the founder of Spotify.
The dinner was me, Daniel, and my friend Patrick from Invest Like The Best.
I've been a fan of what Daniel's been able to build.
I think his life story, I've heard him on a bunch of other podcasts, his life story
is absolutely incredible.
And one of the coolest things to happen to me over the last few years is Daniel is constantly
like tweeting about the fact that he likes his podcast.
He goes on other podcasts and mentions founders podcasts.
And so during the dinner, when Daniel asks, can I give you a recommendation for a book
to cover on the podcast?
It was like, of course, and it is this book that contains one of the most unique stories.
I cannot think.
I went back to the list and I cannot think of another example of somebody that had a life
like Evar Kroger had.
This book reads like a thriller.
It's almost like he's some kind of evil genius secret agent.
So before I jump into it and keep in mind, this is not a typical biography.
We're going to heavily focus on the last 10 years of his life.
He shoots himself or at least that's the rumor.
Some people believe he was murdered.
He shoots himself at the age of 52.
But before I jump into the book and try to start explaining how he was able to do what
he did, I need to differentiate because anytime that you hear his name and a lot of people
don't know who he is, in his day, he was one of the wealthiest and most famous businessman
on the entire planet.
And anytime you read about him or you search about him, he's always compared to the
Metro, the Ponzi scheme or the person that Ponzi scheme is named after Charles Ponzi.
I need to read this one paragraph from Evar's Wikipedia page that explains why that comparison
is not 100% accurate.
It says Kroger's financial empire has been described by one biographer as a Ponzi scheme.
However, in a Ponzi scheme, early investors are paid dividends from their own money or
from that of subsequent investors.
Although Kroger did this to some extent, he also controlled many legitimate and often very
profitable businesses.
He owned banks, real estate, a gold mine, pulp and industrial companies.
In addition to his many match companies, many of these companies have survived to this
day.
He owned or controlled over 400 companies.
And so his main company, probably his most profitable company, was this Swedish match
monopoly company called Swedish match, it was founded in 1915, but it existed up until
a few years ago when Philip Morse, the gigantic tobacco company launched a takeover bid for
Swedish match and they actually took it private.
They took it, they delisted it from the Swedish stock market that just happened a few years
ago.
And so when the book starts, Evar is 42 years old and he's going to America to try to
pitch American investors on this European monopoly.
And so he's going to be able to make a big money.
And so he's going to be able to make a big money.
And so he's going to be able to make a big money.
And so he's going to be able to make a big money.
And so he's going to be able to make a big money.
And so he's going to be able to make a big money.
And so he's going to be able to make a big money.
And so if he's going to do a presentation in front of a bunch of investment bank or something
like that, I mean, if he's going to a party, if he's going to a meeting, he is practicing
what he's going to say.
And the end result is a bunch of descriptions of Evar in the book, such as he spoke in beautifully
constructed paragraphs.
When Evar began weaving a story, a listener had no choice but to follow him to the end.
He dominated every conversation.
Those around him wanted him to say more, not less.
But ever the topic, he always returned to business.
There was an air of greatness about him.
He could get people to do anything.
They fell for him.
They couldn't resist his peculiar charm and magnetism.
And you're going to see world class communication skills because we see how his first pitch to
investors is simple, easy to understand.
And this is an important part.
It is completely legitimate what he's doing at this point.
And so as I was reading this part of the book, it's talking about he's on a boat.
He's sailing from Europe, going to America.
And he's like, well, why is he going to America?
He says, for one simple reason, that's where the money was.
In 1922, America was a wash and cash.
Now, this is remarkable.
It's amazing to me how many times the same principles you and I talk about are applicable
to multiple different fields.
And this is a theme that you and I are going to talk about a lot today when you analyze
the career of Evar Kroger.
And so Evar is on this boat.
He's like, listen, I have a product to sell.
I need to go to where the money is.
A few weeks ago, I did this episode on this guy named Joseph Duvene.
This is episode 339.
Joseph Duvene was the art dealer to the robber variance.
And in that episode, there's a line that says, Duvene noticed that Europe had plenty of
art and America had plenty of money.
And his entire astonishing career was the product of that simple observation.
Evar did the exact same thing.
Instead of bringing European art to America, he's bringing European matchmen uply.
He's giving American investors a chance to invest in European match monopolies.
And that may sound funny today, like when's the last time you bought some matches.
But at this point in history, matches were basic and essential product that everyone
used.
And so we need to go back to this idea that his first pitch, these are excellent communicators,
right?
It's simple, easy to understand and legitimate.
And so it says he wasn't trying to sell anything complex, at least not at first.
His pitch involved a basic and essential product that everyone used and could understand
the match.
The time matches were a staple, people used matches to light care scene lamps, gas heaters,
stoves and tobacco.
Everyone carried matches, everyone used them and everyone bought them.
So his pitch is simple.
American investors could earn profits from a monopoly abroad.
And what is fascinating is how he came to build this Swedish match monopoly.
He uses a lot of ideas.
In fact, he studied in detail, John De Rockefeller and your Carnegie.
And he essentially did what you and I do in this podcast.
Like we study the principles behind, right?
We're not trying to copy the what we're trying to copy the how.
He copied the how, how did Rockefeller build monopoly and oil?
How did Carnegie build monopoly and steal?
And he's like, oh, okay, I can take those exact same principles and I'll apply it, right?
I'm not building the American oil monopoly, the American steel monopoly, but I can take
those principles, export them and actually use them to build a Swedish match monopoly
and it works.
And so before he starts building this monopoly in the match industry, he's actually has
a really, really successful career building this construction firm and construction partnership.
And as he makes more money, he gets more interested instead of building bridges and buildings,
he gets more interested in constructing companies.
And so he starts branching on to other industries.
He's trying to build film companies in real estate and telecommunications.
He's already a millionaire by this point in his life and then he sees that his family's
match business in Sweden was struggling and he identifies.
He's really smart, this guy's likely a legit genius.
And so what he notices is there's a lot of characteristics in the Swedish match industry
that's very similar to the early American oil industries.
Such if you wanted to open an oil refinery in Rockefeller's day, there was almost no barrier
to entry.
And so in Rockefeller's opinion, that industry is only going to survive if it's under
the complete control of one formidable individual.
Evar runs this exact same playbook in the match industry.
So it says he quietly purchased match factories throughout Sweden.
He was a pioneer of vertical integration.
He'd buy timber tracks and chemical factories to secure the raw materials needed to make
matches.
This is exactly where Rockefeller did it.
He merged the leading competitors to form Swedish match.
It was a single dominant business.
His plan was to limit competition and crease profits by securing a monopoly on match sales
throughout the world, mimicking the 19th century oil, sugar and steel truss.
This match corporation was just one part of his empire.
He controlled 10 other businesses through his public holding company.
He controlled the holding company with a tight grip.
Annual meetings were perfunctory.
At this point that he's coming to America, his two largest and most profitable businesses
is Swedish match.
And then his construction firm Kruger and toll.
He's going to use a track record of these two successful companies and raising a ton
of money.
He raises hundreds of millions of dollars from American investors.
And the main thing of his life is career is that too much finance ruined the legit business.
His two companies were making a profit.
That wasn't enough for him.
He wanted to be richer.
He wanted to operate on a bigger scale.
He wanted to have hundreds and hundreds of different companies.
And so what they would do is he would say, hey, we pay a 25% dividend.
And even though his financial statements contained almost no information, it didn't matter when
investors learned that Kruger and toll had been paying 25% dividends each year.
They simply went mad.
And this is an important point.
He understood human psychology.
He was studying the history of finance.
Now I would say he studied the history of finance.
It's not clear to me.
In fact, I would argue, I always say that learning is not memorizing information, learning
is changing behavior.
So he studied this, but it never affected his behavior.
So he, to me, he never really learned.
It said that he had studied financial history and was aware of the infamous periods of Mania
and later panic, such as the South Sea bubble of 1720.
And the infamous rise and collapse of the Dutch tulip bubble in 1637.
In those cases, men became rich as they rode the wave of investors speculating.
He knew that timing was crucial that American optimism would not persist forever.
When investors were manic, they would purchase just about anything.
But during the panic that inevitably followed Mania, the opposite was true.
No one would buy.
And so even at this point in the book, we know how his story ends.
He loses millions of dollars for a ton of people, some are just normal investors.
Then he also loses a ton of money for very wealthy people.
He kills himself and then he dies in disgrace.
And so I'm reading this.
I'm only a few pages into the book.
And I immediately think of what Charlie Munger said that I feel is true over and over
and over again.
And he said, the problem isn't getting rich.
The problem is staying sane.
The problem isn't getting rich.
The problem is staying sane.
Hevar was not able to stay sane.
And so when he gets to America, Evoar starts to target several different investment banks.
And what he does is really smart.
He doesn't.
He knows, hey, JP Morgan, they're not going to give me any money.
Goldman Sachs is not going to give me any money.
And so he targets this bank called Lee Higginson.
It was one of the most prestigious and profitable banks in the world.
But it was a step behind JP Morgan, Goldman Sachs and Lehman Brothers.
Before they get involved with Evoar, it's a seven decade old.
It's a 70 year old company.
By the time they're done, they are bankrupt and the partners are impoverished.
And this is the first example that I referenced earlier of this.
Evoar just had this fundamental understanding of human psychology, this genius level, this
evil genius level way to manipulate people.
And so there is a partner at Lee Higginson, this guy named Donald Durant, who is going
to be his main banker throughout this entire thing.
And so as he's on his way to America, he starts seeding this.
They're covering what he's doing in newspapers.
He's having rumors spread within the finance industry about how profitable Kruger and
Toll is and how successful Swedish match is.
He is watering the ground before he ever meets him.
So Durant is devouring all the details of his of Evoar's trip to America.
All these people around him are telling him, hey, Kruger and Toll and Swedish match are
the two hottest companies outside the United States.
The colleagues, there is a branch of Higginson and company in London.
His colleagues in London reported that Evoar already had made them a fortune on a highly
unusual and complex swap transaction.
And the end of this sentence is really important that even the sharpest investment bankers
could not understand.
That is another main theme that he got away with that made this scheme of his successfully,
he intentionally muddied the waters to make them appear deep, turns out in the end he
didn't even understand what he had built, but we're still half a decade at least from
there.
So in addition to this, Evoar pays a Swedish stockbroker, this guy named Lagerkrantz, to set
an appointment with Durant to inquire about syndicating some investments for some of
his Swedish clients.
That was the stated goal.
This is what I meant.
This guy is like an international man of mystery.
Nothing, like appears, nothing is as it appears with Evoar Kruger.
So he sends Lagerkrantz before he gets there.
He says, hey, I'm going to pay, he actually pays him to do this.
Go and have this meeting with Durant under this false pretence.
And then happen to mention me and what I'm up to.
And the fascinating thing is this appeared as just an inside, just something that casually
came up in conversation.
Durant never imagined that Evoar had arranged it all the entire time.
And so by this point, news about Evoar and how great his companies are and the fact that
he's coming to New York, he's got these great opportunities.
Durant's heard about it from three or four different sources.
So he contacts Evoar and he's like, let's please have a meeting.
Now this is what I meant that Evoar understood human psychology.
If something is limited and hard to get, that increases desire, this works for both products.
Like Ferrari and for people like celebrities.
At this point, Evoar made himself a business celebrity.
And so even though he wanted to meet Durant the whole time when Durant asked to meet him,
Evoar is like, no, I'll try to fit it in.
Let's see what I can do.
I read three or four books on Enzo Ferrari.
There's a great story that I've never forgotten where in the early days of Ferrari, I think
he's making probably 100 cars a year by this point.
These all these rich Americans are coming to Italy.
The Enzo Ferrari gives them a tour of the entire factory.
And he's like, come, you know, please Enzo, let me buy a car.
And he's like, oh, no, of course, like I'll see what I can do.
But you have to know, like, you know, it's going to be at least a few months, maybe a year,
whatever the case is.
And the American leaves and Enzo's employee walks up to him.
It's like, I don't understand.
Like why did you tell that then behind the factory, we have a parking lot full of unsolved
for our worries.
And Enzo said, yeah, but Ferrari has to be desired.
It can't be something that you can, that's readily available.
He understood that at the very beginning and the very early days of the history of Ferrari,
that fundamental understanding of human psychology, that like genius level understanding of human
psychology, that Ferrari had, you see that EvoR Kruger had as well.
And so it says, when Durant requests the meeting, EvoResponda, that he was busy with other
business, but he would try to arrange a time.
He had learned that playing hard to get was a promising strategy with America's elite.
He waited a few more days to ensure that the publicity about him had saturated Lee Higginson,
which is the bank that Durant works for, the bank that EvoR is going to take down.
And finally, he arranged to have a meeting with Durant.
And there's a great line in the book, a few pages later, this meeting ultimately would
lead to the destruction of their firm.
And so this is the pitch to Durant.
This is a great description of EvoR's plan.
Listen, this plan would and did work.
He was only the lying, the falsifying of his financial statements and being overextended
that caused his downfall fall.
That's why he said it's not a clear Ponzi scheme.
It was working.
He just took for some reason, he risked what he had to pursue what he didn't have and
didn't need.
There's a great line in one of Warren Buffett's shareholder letters about this.
And when I was reading this section and what EvoR wants up doing to this, you know, taking
a good plan and destroying it reminded me of something that Warren wrote about on the
importance of using debt sparingly and making sure that you're putting survival ahead of
every single thing else.
I'm going to read you this excerpt.
It comes from the book, the essays of Warren Buffett.
If you have a subscription to Founders Notes, highly recommend after this, going back,
I have 65 highlights and notes from this book, spend the 10 minutes it takes to reread
those highlights.
It's excellent.
And on the note, the note I left myself on this, it says all that matters is to survive
the rest is just words.
That is a quote from Charles De Gaulle.
And this is what Warren Buffett says in his shareholder letters.
We use debt sparingly.
We will reject interesting opportunities rather than over leverage our balance sheet.
As one of the Indianapolis 500 winners said, to finish first, you must first finish the
financial calculus that Charlie and I employ would never permit our trading a good night's
sleep for a shot at a few extra percentage points of return.
I've never believed this is what Warren is about to tell us.
Warren Buffett's about to tell us that he never believed in is exactly what Evar Kruger,
the mistake that he made.
This is what I mean, learning is not just memorizing behavior learning learning is not just
memorizing information learning is changing your behavior.
Evar knew this and he could not change his behavior.
This is like my worst nightmare.
I'm like sweaty.
I have a sweat above my lip right now thinking about this.
I've never believed we're back to Warren Buffett.
I've never believed in risking what my family and friends have and need in order to pursue
what they don't have and don't need.
And so with that in mind, this is the plan.
This is the new idea, the prospect of Americans investing in foreign monopolies.
You can't monopolize in America.
This is after they've broken up trusts like standard oil and steel and everything else.
And I trust laws prohibited a match monopoly in the United States, but nothing prevented
American investors from buying into monopolies abroad.
And the smart thing that Evar does again, he's a student of history.
He's like, oh, this idea worked.
I'll just I can adapt it to my circumstances, my industry, my environment now.
So he knew that there was this extraordinary scheme that was orchestrated during the 17th
century by the Skining Robert Harley.
He's the one that formed the South Sea company.
Now the history behind this is fast, fastening.
So he forms the South Sea company to assume England's national debt.
The scheme had become known as the South Sea bubble for the sharp increase in the price
of South Sea company shares.
But the original idea is the same idea that Evar is going to use in exchange for the South
Sea company, assuming the debt of England of the British government, the British government
gave the company a monopoly on trade to the South seas.
These government granted monopolies are very, very common in Europe.
That is another important idea.
Nothing that Evar was doing was new.
He just applied it to a different industry.
It was an audacious deal, but a simple idea.
And the idea could be replicated.
It was not limited to England and the South seas or to a time 200 years earlier.
In theory, if a government needed money and a company wanted a monopoly, both sides could
benefit from a similar compact, anytime, anywhere, with any product.
Evar's idea was to do just what Harley had done, except with matches instead of South
Sea trade.
Evar would lend money to the government of Europe in exchange for a monopoly concession
for the production and sale of matches within their territory.
There was one problem though.
Evar didn't have enough money to lend millions of dollars to foreign governments.
Evar needed the backing of a major bank.
You see where he's going here.
It's very easy to follow what he's trying to do.
I'm coming to you because I need the money.
I'm going to take the money raised from American investors.
I'm going to help out European governments that are in debt in return from lending the
money.
They have to give me a monopoly in their country on match production and selling matches.
And so this is the summary.
It's very similar to what I just said.
A single thread runs throughout.
Evar's with lead money through Evar to foreign governments in end of return.
Everyone would make unimaginable profits from match monopolies.
He hooked Durant with his simple brilliant idea.
Government loans in exchange for match monopolies.
That's seven words.
You understand exactly what you're buying into.
Government loans in exchange for match monopolies.
And so I want to give a little background because I want to go back to this just insane
idea to me.
The fact that you risk a successful legitimate business to speculate.
And he's not alone.
There's a million examples in the book.
There's a million examples to history.
And that's why it's so important to spend time talking about.
Most of this book is just about the last decade of his life.
But there are a few examples from his early life that are important to go over because
he wasn't just a financier and an entrepreneur.
He was also a civil engineer.
And before he made a bunch of innovations in finance, which we'll get to, he also made
innovations in building.
And so this is fascinating.
This is the self confidence of a 28 year old Evar.
At the time he's working on the construction of the Archbold Stadium at Syracuse University.
And I thought this paragraph was fascinating.
He regarded his bosses there as infuriars, men who lacked the intellect and ambition of
the stadium's namesake, John Deed Archbold, the great capitalist, oil refiner and philanthropist.
Evar wrote to his parents, I cannot believe that I am intended to spend my life making
money for second rate people.
I shall bring American methods back home to Sweden.
I shall bring American methods back home.
Wait and see.
I shall do great things.
I am bursting with ideas.
I'm only wondering which to carry out first.
So as he is working on the construction of the stadium, he meets this other guy named
Julius Conn.
Julius Conn is the inventor of this method for making iron called Conn Iron.
Conn introduces Evar to another Swedish engineer named Paul Tol.
And that is when Evar leaves America, goes back and finds him and Paul Tol together formed
this company, this very legitimate and one's being very profitable construction company called
Kruger and Tol.
And what he does next is rather genius because it's not like construction.
Humans have been building things forever.
It's like one of the most ancient industries.
And yet the way that Evar, young Evar, figures out to gain entry in a foothold and in existing
industry is fascinating.
It is by realigning incentives.
And if there is a, the main character of the story is Evar Kruger, right?
The supporting character is the super power of incentives.
I almost started the podcast with this long speech that Charlie Munger gives on incentives
which I'll read to you in a little bit.
It is so obvious in the story, the power of incentives, like the role that it plays.
And so not only do they make innovation and actually the method of constructing buildings,
right?
But maybe even more important than that, he's able to take customers from other existing
businesses by realigning their incentives.
And so it says he came up with novel contract features.
This is a really surprising way to get customers a really surprising way to increase your distribution.
So Evar is willing to change the standard terms of construction contracts to reallocate
the risks to him.
If I want to build a building and I hire a construction firm, anybody who's built anything
knows that these timetables, most times they're late, they're almost like they just pick
dates out of the van er and just completely make it up.
And so up until this point, construction firms had not been willing to take on the risk
associated with delays because that's every day the construction firm that has not built
my building is late.
That costs me money.
And yet I don't have any control over when they complete the creation of the building.
And so the ability to speed up the project lies with the construction company, but the
risk of them failing to do so lies with the client.
Evar understood this misalignment of a sentence and all he did is just realligned it.
And he's like, I'm going to take on that risk.
Construction firms, not clients, were in the best position to reduce delays.
Evar realized that the best way to minimize construction delays was to shift the risk
of loss that arose from such delays to him, meaning to his firm.
And Kruger and Tol would have the incentive and the ability to speed up a project.
And here was the punchline.
Clients would pay more if they knew the job would be done on time.
This is really, really smart.
Kruger and Tol became the first firm in Europe to commit to finish projects by a fixed date.
Step one, I guarantee that your building is done by this date.
Step two, if I do not follow through on that commitment, I have to pay you the client
$1200 for each day on late.
That is step two.
Step three, if I finish early, you play me for every day that I beat that agreed upon
fixed date.
Again, this guy is a genius at inlining incentives, understanding human psychology, and they're
making it very easy to understand what he's trying to explain to you.
You customer hate construction delays.
So therefore, I will guarantee you that your building will be done by this date.
Any day I go over, I pay you more money.
Any day I save you, you pay me more.
The end result.
He repeated this formula and earned completion bonuses for every single project.
Builders were happy to pay extra to know a high quality project would be finished ahead
of schedule within a few years.
Kruger and Tol was regarded as the best building company in Sweden a few years later as one
of the top firms in Europe.
That is really smart.
It also leads us to the next part of the story.
Why is this important?
Because he's going to use his construction firm as collateral to enter and then consolidate
the match industry.
And so now he goes to banks and Sweden sites look at the successful construction firm.
I'm going to I want to run this playbook that they use in America on the Swedish match
industry.
And I'm going to use this very successful company that have as collateral.
He saw that the match industry was in the same economic position, oil, sugar, and steel
had been a few decades earlier.
There's too many owners of too many factories.
Competition was driving prices down.
This is when he starts doing and he doesn't unbarrowed money.
Just like Rockefeller did at the beginning of his career.
You and I have gone over Rockefeller in detail.
I will do probably 15 more episodes on Rockefeller read every single book on Rockefeller could
find why because Charlie Munger believes that Rockefeller built the greatest company of
all time.
And you see in this book, this is fascinating.
Evor is using Rockefeller S domination tactics.
I think the last time I talked about this was on episode 324 where Rockefeller is writing
all those letters to his son.
If you really want to go about domination and like his conquering mindset.
So this is what he's doing.
The next over the next eight years, Evor a parlayed a few family match factories into
a conglomerate.
He modernized factories and expanded overseas sales.
He doubled production and and tripled profits.
He reduced costs by purchasing the companies that made his machines as well as companies
to supply the chemicals that he needed to make the matches.
At the beginning, everybody said, Evor's decision to enter the match business seemed
foolish.
They said the exact same thing about Rockefeller.
Evor were continually to vertically integrate.
He now is taking over all the factories because you need all like phosphorous and you
need all these other chemicals to make matches.
So he would take over the suppliers and then he would choke off his competitors so they
can no longer buy the supplies they need to manufacture the matches that they're trying
to manufacture.
He would destroy anyone who refused to sell with ruthless tactics.
He took over supply contracts, interviewer customers and temporary lowered prices below
cost.
Rockefeller did all of those.
As a result, Swedish match was one of the few European businesses that remained profitable
throughout the war.
That is World War I that they are referencing and why are they profitable because they
are a monopoly.
And so that is all important back story because now we're back in America in 1922.
He has control of these two companies, the Swedish match monopoly.
He has Kruger and Toll.
He's got a bunch of these other companies too, but there's those two main ones.
And so now his banker, the one that he's going to destroy, Durant, makes this makes Durant's
pitch to American investors very easy.
Because investors like all people, they like easy to understand stories.
And his whole point is like this guy's got a great track record.
He's got a thriving business that is paying very high dividends.
And so that same person with a great track record, thriving businesses, high paying dividends,
now has a new idea that's easy to understand, which is loans to governments for more match
monopolies.
Do you want to invest?
Oh, by the way, one of his companies is moving 25% dividends every year.
And so this is when he starts what he's going to call international match corporation.
This is the company that American investors are going to invest in.
And so he purposely sets up his board.
He wants people that are distracted.
And so he's selecting these directors that are supposed to quote unquote oversee international
matches business.
And one of them is the nephew of John D Rockefeller, which Evar thought that was incredibly
cool because he idolized Rockefeller since he was a young man.
But why is he this guy is a Percy Rockefeller?
Why is he picking Percy Rockefeller?
Evar saw that Rockefeller was currently serving on more than 60 other boards.
He was an ideal director because he was well connected and far too busy to care about
any details.
This guy's an evil genius.
Evar had idolized Rockefeller since he was a boy and now a member of that family would
serve on his board.
There's a great line describing his corporate structure.
It was like a corporate family tree from hell and it extended in up security.
And so this is his main mistake.
This is when he constantly having to raise more money, raise new funds to pay down past
debts and past promises.
There's an excellent line.
I went and searched all my nights notes and highlights because I remember he said something
so I just put in the type the word survive.
And it comes right up and it says victory in our industry is spelled survival.
That is Steve Jobs, Donald Durant and his partners had no idea.
This is the investment bankers that helped Evar raise money from American investors.
They had no idea how desperately Evar needed the money.
Although his business has seemed to be thriving, he had promised too much to his early investors.
He had borrowed tens of millions of dollars from Sweden's leading banks and both Kroger
and Tol and Swedish match were paying double digit dividends every year.
The company's profits alone did not always cover these obligations.
This is when we get into this like Ponzi-esque scheme that he had going on.
In order for his businesses to continue to succeed, they had to continue to grow.
That's fine.
This is 1922.
They're going to grow.
1929, you cannot tap the markets anymore and that's what causes him to go bankrupt.
If they stopped growing, Evar would not be able to repay his earlier debts or continue
to pay high dividends.
It wasn't rocket science.
To pay a 25% dividend every year, you either had to earn 25% from your business or else
raise more money.
This is crazy.
A large portion of the dividends recently paid by Swedish match and Kroger and Tol came
from cash raised by international match in America, in other words, the dividends paid
to old investors came from the proceeds raised from new ones.
That is Ponzi.
This is crazy that he did this because unlike Charles Ponzi, Evar's profits were real.
Swedish match made and sold billions of boxes of matches every year.
Kroger and Tol built landmark buildings throughout Europe.
Evar believed that if he kept raising cash to pay earlier debts, his business would grow
fast enough to survive.
What are you doing?
Why are you so smart and talented and why would you put yourself in a position like that?
Victory in our industry and every industry is spelled survival.
Even the very best ideas fail if a company runs out of money.
There's a great line about this by the founder of Sequoia Don Valentine.
He says all companies that go out of business do so for the same reason.
They run out of money.
The minute Evar's business is stopped growing fast enough and the minute he cannot raise
more money, he goes out of business.
He destroys everything that he spent 25 years building.
For what?
Why?
It goes back to what Charlie Murray said.
The problem is not getting rich.
It's staying sane.
He was unable to stay sane.
And so right before he raises money from American investors for the first time, there's
a public account in Sweden that had found that Swedish matches finances were so complicated
that he could not unravel them.
What he said at the time was that the Swedish match consortium of companies should be called
the greatest speculation venture in Sweden.
You have Swedish regulators that are coming down and again, there's no laws.
There's a lot of stuff that he did now would be illegal.
Even then, the regulators start talking to Evar's main banker in Sweden.
This guy named Ridebeck.
Ridebeck is extremely influential.
He's able to calm down the regulators.
He says, listen, it's our interest to survive.
We don't need costing new rules.
We don't need extra regulation.
This report that's put out about the dangers that's happening with the Swedish match company,
it's phrased as advice for regulators and it didn't require any action.
You're like, I don't understand.
Why would the bank want to do that if their main customer is potentially taking risks
that can make them lose money?
The answer is incentives.
The banks were not only lending money to Evar, they were his biggest shareholders.
When the bankers help get the regulators off of Evar, they're in turn getting regulators
off themselves.
Why?
They like those fat dividends that are coming in and when you give people fat, effortless
money, they don't question things.
When Swedish match paid hefty dividends, much of that money went to the bank.
Again, straight out of Rockefeller's playbook for different reasons.
Rockefeller went around in the early days.
He did something very similar in his early days of his career.
The banks that he was borrowing money from to build the early days of Standard Oil, he
also gave them stock and he gave them stock.
So his competitors, right?
His other oil refining competitors would code that same bank, hey, give me a loan.
I need to be in business and the bank's like, why would I do that?
You're a competitor of mine now because I'm not just the banker, I'm the partner.
It's incentives.
It's a mis-in-line and a minute incentives all the way down throughout this entire story.
It is the supporting character of this story.
And again, there's some banks that, to leading two other banks that he raised money from
the past, they made him settle their loans and return their money and they said, hey,
you got to raise funds somewhere else.
And so he did just what Duvene did.
He says, okay, where's the money?
America, okay, cool.
I'll hop on the boat and go over there.
And so then we go back to Evar being this evil genius.
Of course, he's selling securities in America.
He gets in his big bank, they're like, hey, we need to have an auditor so they hire a
young auditor at Ernst and Ernst.
And this entire story, this guy is just completely mismatched against Evar and Evar manipulates
him every time.
But again, every single time somebody looks at his books like this doesn't make any sense,
this guy name is Burning, A.D.
Burning.
Burning was baffled by this arrangement.
He couldn't decipher the financial statements Evar sent.
Were the measures of international matches profits accurate?
Did the company's balance sheet entries include the assets and liabilities of Swedish
matches subsidiaries?
There was no way to tell.
He had to rely entirely on Evar's numbers, which changed more frequently than a careful
accountant would hope or expect.
Everything he did was based solely on information provided by Evar.
And yet he never says anything.
Why doesn't he say anything?
Again, it goes back to intense, so we'll get to in a minute.
At the time, there's no federal member.
There's no federal securities regulation.
So everything at this time in America was handled by the states.
You know what's hilarious?
It goes back to this idea that anyone who bothers to look closely is confused and suspicious.
And so he's able to shake or get away from almost every other regulator, except this
one random regulator and securities regulator in Wisconsin.
And so they keep sending burning because he's Evar's auditor over and over again.
It's like, what's going on with this?
We need more information.
Every time they get more information like this isn't good enough.
And then this is where burning should have known.
Burning knows that Evar is a liar.
And it's not even that sophisticated, sloppy and obvious.
He sends, he's like, hey, Wisconsin needs all this information.
I need more about international matches books.
And so he sends, Evar sends burning these financial statements.
Listen to this.
It was obvious that the statements had been hastily and not very carefully prepared.
Why?
Evar sent balance sheets for international match for 1921 and 1922, showing that the company
had a 1 million shares outstanding.
But international match had not even existed during those years.
And look at the numbers, right?
He's just completely making everything up.
The company doesn't exist, okay?
But he said 1921, we made $1.9 million in profits, 1922, $2 million in profits, 1923,
$2.1 million in profits and it goes on.
Every year when you know what he does, he literally just increases the amount of profits
by $100,000.
So I made 1.9 then the next year it's 2, then 2.1, then 2.2, then 2.3.
That's not a joke.
It is literally what he submitted to these regulators.
And the first sign that Evar control burning is, he's like, oh, you obviously made a mistake.
Don't worry, I will reconcile.
He fixes them to the best of his ability on the very limited knowledge that he has and
then resubmits them to the Wisconsin regulator.
But the message was very clear.
His auditor would easily change numbers for him.
And why he does this makes, will make perfect sense later on.
Again, I need to paint this picture here because it sounds absolutely, in the world that
you and I live in, remember, which is heavily formed by the financial swindle that Evar
is perpetuating in the book.
It sounds ridiculous.
Like, how is this possible?
And it's, but he was par for the course.
Not at all.
I mean, he, this guy took it to extreme, but this lack of information, this lack of
regulation, it was just par for the course at the time.
And so it says, few people seem to care that the information was incomplete.
Indeed, international matches, cursory, financial statements were typical of corporate
disclosures at the time.
Even companies with securities listed on the New York Stock Exchange at the time would give
scant detail fewer than one third of stock exchange companies even published, even bothered
to publish quarterly reports.
Another third of stock exchange companies didn't publish any reports at all.
And so it's this constant mix of legitimate business, outright lies, this excessively
complicated company tree structure.
But again, this idea was not new for centuries.
European government had granted monopolies of all kinds of production and trade.
These were not gifts.
The government's required payment and return in the form of cash, interest, or share of
the profits.
These monopolies were an alternative to state control industry remained in private hands,
but government received a steady stream of revenue.
So past examples before you've already did this on with matches, early monopolies included
cigarettes, gunpowder, liquor, petrol, playing cards, salt, and tobacco.
Even the idea of a match monopoly was not new because we're in the 1920s, right?
The first match monopoly in Europe was created back in France in 1872.
He's just taking an old idea and bringing it back to his modern day.
And so the first deal they do, which is a legitimate deal, this is international's first
deal.
They say, okay, we'll end you a bunch of money in exchange for this monopoly.
This is just after the war.
So Poland needs, he says it has a bunch of humanitarian, physical needs.
And the deal is structured like this.
International match would pay a royalty from its match sales in Poland to the Polish state
and the proceeds of the royalty would secure the loan to the government.
As a result, all existing match factories were nationalized, combined, and then leased
two international match for the next 20 years.
That is a legitimate deal.
That is real.
And then of course, he does something that he's always combining the legal with the illegal.
When he received a copy of the signed documents, he did something rather unusual.
He thought it might be useful to be able to replicate Dr. Glakwaki's signature in the
future.
That is the senior finance ministry of Poland who is doing this deal with.
So he gets the documents.
What does he do?
He makes a copy of the signature.
What are you doing?
So he took a signed copy of the contract to a stamp shop and ordered a rubber stamp that
would produce a exact replica.
He would obtain rubber stamps of official signatures for nearly all of his match deals.
I'm telling you, if you read this book, this guy's going to just blow your mind over
and over again on the very next page.
He has a problem.
I need more cash from investors, but I don't want to give up control.
So what could I possibly do?
This guy literally invented the B-share.
This dual-class share system that is still used to this day, he devised an elegant solution
to his problem.
It was an ingenious piece of financial engineering that would survive the test of time.
He introduced a new type of security, which he called a B-share.
He divided its common shares into two classes.
Each class would have the same claim to dividends of profits, but the B-share would only carry
1 1,000th of a vote compared to one vote each for an A-share.
B-share could be sold to investors without affecting control.
He could go back to incentives.
He was just sloppy, with his record keeping, caught in a lie.
And Durant, the main guy that's going out into the American community and saying, hey,
buy these securities, sometimes it pops up.
He's like, man, this is kind of weird.
So then he goes and talks to burning and earns an earns.
You're supposed to be the auditor.
Are you okay with these numbers?
Like, what's going on here?
But then what happened?
It's incentives.
It says Durant was conflicted because EvoR's financial statements were sloppy and incomplete.
Investors nevertheless clamored to buy securities of international match.
So any kind of, I feel a little uneasy about this.
As soon as that money floods in the door, Durant's concerns are eliminated.
And so when Durant tries to balance his suspicions with what's actually happening, he just
is like, oh, well, the money's coming in.
He says everything worked just as EvoR said it would.
International match began receiving quarterly interest payments of about a million dollars
each quarter, just as the Greenland Poland said.
As more cash flowed in, the director's questions went away.
And I think that sentence.
So I double underlined that sentence.
As more cash flowed in, the director's questions went away.
I think that double underlined sentence is why these Ponzius deals last a long time
rather.
I remember Edoor's autobiography.
One of my favorite books that I've ever read.
It's episode 22.
It's called A Man For All Markets.
You should read the book or read it.
I think two or three times right now.
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Bernie was surprised to see that Toronto owned that owed international match $17 million.
He asked Evar for some assurances about Toronto.
What was it?
Did this company make any profits or have any assets?
Why hadn't he told him about this existence?
Evar reassured Bernie that Toronto's income during 1925 was 46 million
and that Toronto made enough money in one year to repay its entire debt.
There was no reason for concern.
There was no reason for concern.
There was no evidence.
There was no evidence of what Evar is saying.
He's just saying, no, this is, I can write it down in a piece of paper, but this is what it is.
It's in my head.
Now, you're like, this is ridiculous.
Like, why isn't Bernie doing anything?
And they all they're asking the same question.
What was Bernie supposed to do?
Should he be suspicious of Evar?
Should Bernie accuse his most important client of hiding crucial information?
With this accusation, then destroy Bernie's relationship with Evar.
And the destruction of that relationship with that ruined Bernie's chances of making partner.
Evar paid all of his bills on time.
His fees to earn standards were rising.
The match monopoly in Poland was real.
Evar had a reputation that was unassailable.
Every day in the newspaper, there's stories about Evar negotiating potential match monopolies in Ecuador,
Estonia, Greece, Hungary, Peru, Portugal.
Those negotiations were undeniably real.
Evar met regularly with government leaders.
Given these facts, burning told himself,
Gerranta wasn't important.
It couldn't be.
In other words, burning is incentivized to believe Evar.
Because if he's wrong, if he's lying, all the overtime, all the extra money on it,
I forgot, Evar is also paying him for consulting fees and paying him on the side and everything else,
paying for trips to his wife, all of that, the trips, the extra money, the prestige, all of that goes away.
And so it's at this point in the book where I think about one of my favorite passages from Port Charlie's Almanac.
I'm going to pull out my highlights now.
It really, the summary of what Charlie's about to tell us.
Number one, we all underestimate the power of incentives.
Number two, never ever think about anything else before the power of incentives.
And number three, the most important rule in management, get the incentives right.
As usual, Charlie Mugger described it in a beautiful way.
Almost everyone thinks he fully recognizes how important incentives are in changing behavior.
But this is not often so. I think I've been in the top 5% of my age cohort almost all my adult life and understanding the power of incentives.
Yet I've always underestimated that power.
Never a year passes that I don't get some surprise that pushes a little further my appreciation of incentive superpower.
One of my favorite cases about the power of incentives is the federal is from a federal express.
So FedEx.
The integrity of the FedEx system requires that all packages be shifted rapidly among airplanes in one central airport each night.
The system has no integrity for the customers if the night work shift cannot accomplish its assignment fast.
FedEx had one hell of a time getting the right the night shift to do the right thing.
They tried everything in the world without luck.
And finally, somebody got the thought that was foolish to pay the night shift by the hour when what the employer wanted was not maximize billable hours of employee service,
but fault free rapid performance of a particular task.
If they paid the employees per shift and let all the night shift employees go home when all the planes were loaded,
the system would work better and low and behold they test this and that solution worked.
And then Charlie Mungert tells us another story from business history early in the history of Xerox Joe Wilson, the founder of Xerox, had a similar experience.
He couldn't understand why it's new machine was selling so poorly in relation to its older and inferior machine.
He found out that the commission arrangement with the salesman gave a large and perverse incentive to push the inferior machine on customers.
This maximum is a wise guy to a great and simple precaution in life.
Never ever think about something else when you when you should be thinking about the power of incentives.
The most important rule in management is get the incentives right.
And so if you analyze the incentives in this story, the behavior makes perfect sense.
So there's a many, many ways like he's constantly fighting off.
I think I've said this multiple times over a decade.
People are like, this is weird. The books seem funny.
Like there's no detail. The numbers change.
What the hell is going on here?
And he's got other ways, you know, the evil genius.
So he's got other ways to get people off of his trail.
He has an auditor, ask him for a bunch of paperwork.
That paperwork is back in Sweden.
He does something here that I remember.
I was, this is probably 20 years ago.
I was reading a bunch of biographies of very famous like trial attorneys.
And I think it was the, the biography of Roy Black, if I'm not mistaken.
And they had a tactic that was very interesting where let's say they were representing their client.
They knew a client did something wrong.
And during discovery, you know, the other side's asking for all the, all this information.
And you're compelled by law to give them that information.
Hey, cool. We need to give this to you. They would essentially bury them in a mountain of paperwork.
So see, it's six months to go through discovery. They'd give you something that you couldn't read in 10 years.
Now, you might have been to find that need on the haystack early, but their goal was to just bury you.
It delusional in a mountain of paperwork.
And so he does this exact same thing. He sends the auditor.
He says he was overwhelmed by the mountain of new information that Evoar had sent.
He asked if they could meet to discuss how they might filter what he really needed to see.
So many documents that it was impossible for them to do more than simply scan to the list of what was at the office.
More insane shenanigans. You're not going to believe one about to read to you.
You're just not going to believe it.
He has this. He builds this match palace in Stockholm.
Right. He sets up at his office.
So he's got a desk. You have a visitor. It's like, oh, this is great.
I'm meeting one of the wealthiest and most famous businessmen on the planet.
And that's what he was at this point, right?
He was in this giant mansion. This match palace, right?
You're sitting on the other side of the desk and you notice next to his desk is a little table on the table is three telephones.
The middle phone was fake.
It was a non working phone that Evoar could cause to ring by stepping on a button under the desk.
He used it for two purposes.
One, if you're visiting him and you want to get you out of there, you know, step on the button.
It rings, but I go, sorry.
Like I have another visitor. I have to take this call. The second thing they would do is let's say he has a,
he had like Percy Rockefeller in his office, right?
It's got very famous, like, important people, impressive people.
He wants to impress. He pressed the button.
He's literally taking fake phone calls.
The phone and ring he'd pick up and he would pretend to receive calls from various European government officials,
including Benito Mussolini and Joseph Stalin.
That's not it. It's not. This is not over.
Like, wait till we get to what's next. That evening, he threw a lavish party and introduced Rockefeller to numerous ambassadors.
And I put ambassadors in quotation marks, ambassadors from various countries, who actually were movie extras that he had hired for the night.
This guy's got fake phone calls and hired actors.
What is that? I don't think I've ever read a book like this.
And so the longer this goes on, the more questions happen, the more questions happen, the higher the bills go.
This is how and why his auditor winds up becoming an accomplice.
And he doesn't ever get in trouble for this, by the way.
And the reason that the auditor at Ernst and Ernst did that 80 burning never said anything is exactly what happened.
The Ernst brothers who run the firm that he works for told burning that they had an important matter to discuss with him.
After seven years, Evar had become one of the firm's biggest clients and burning deserve the credit.
You are now resident partner.
Mrs. Burning certainly was proud of her husband.
Now they could afford a new apartment at 40th, 5th Avenue and Greenwich Village.
They could afford a new social circle as well.
The burnings joined several of New York's most prestigious societies.
And so remember this only works if the companies keep growing and if he can keep tapping the markets.
All this is going to fall apart.
And it is absolutely remarkable.
The timing is remarkable because he's going to do his biggest deal ever.
And he's like, I'm going to get a German match monopoly.
I'm going to loan the German government $125 million.
He does not have $125 million to lend.
This is October 29th.
While he's doing this, this is one of the craziest things.
I know it keeps saying that because it's a crazy story.
While he's signing this deal, the stock market is closed due to panic.
This is going to be the largest decline in stock and US stock market history.
At the same weekend, he's signing the biggest deal of his life.
And I think this is just great writing.
I'll give you a brief brief.
On Saturday, Ivar met again with the finance minister in Berlin to finalize terms.
As he held the pen about to sign the loan documents, he considered the two paths his life might follow as a result of his decision.
This audacious deal might be the miracle that would reverse the darkening psychology of investors everywhere.
Think about how grandiose you have to think about yourself if you think that's even possible.
Ivar imagined the buzz spreading about his extraordinary weekend feet.
When the New York Stock Exchange opened on Monday, his securities would store in value.
The rising tide of optimism would make it possible for him to raise more cash and shift his personal loan obligations to American investors.
With any luck by the close of trading Monday, the worst would be over.
That was one possibility.
Ivar could imagine the alternative that the crisis would continue or even deepen was unthinkable.
He couldn't bear to consider what would happen if the market free fall continued.
What align this is.
Ivar's greatest triumph was immediately followed by the most spectacular two-day decline in the history of financial markets.
This time, there would be no recovery.
Warren Buffett once said that you don't know who's swimming naked until the tide goes out.
That's a great description of what's taking place here.
Now he shut off from the capital markets.
His banker is suspicious now. Nothing's adding up. His auditor is suspicious.
Durant, his main banker.
Lee Higginsons constantly requesting meetings.
He's like, look, there's just too many coincidences here.
And slowly but surely all these financial institutions are cutting them off.
For some banks, such as National City, these coincidences were too much and they stopped dealing in Ivar's securities entirely.
Another bank, Credit Suisse, declared Ivar a very dangerous person and said it would not lend to any of his companies.
Ivar finally conceded that he could not afford to pay shareholders of Swedish match.
Ivar's companies would soon be in default.
If Ivar goes down, so does the bank, Lee Higginson.
So two of the partners go to Ivar's apartment in New York to try to see what's going on.
He's in a full collapse and breakdown.
They're led in.
Says although his midday, he was wearing yellow silk pajamas.
He's babbling. He's acting like a madman. They call a doctor.
Dr. Willwright diagnosed cardiac fatigue. He prescribed some sedatives.
During the next three days, Ivar would cycle through episodes of mania and depression.
When the drugs were working, he would simply sit and stare into space.
But when the medication were off, he would stand and shout, I'm losing my mind. I can't remember. I can't think.
He imagined knocks at the door. He answered the phone even though it hadn't rung. And then he collapsed.
You know what I thought of? By this time, I'm at the end of the book.
I think it's more fakery. I think he's completely acting. No doubt he's on a stress.
He's going to want to shoot himself. But this mania, this like, I can't remember. I'm losing my mind.
Being in pajamas. I don't trust it for a second.
This is the same guy that would sit in a room and practice lines for supposed to be casual conversations.
That has a fake phone that carries on fake phone conversations that hires actors and introduces you to him at parties.
Saying this ambassador from Germany, the guy that made rubber stamps of every single government official signature that he ran across.
They got it forage documents. They got it made up numbers on the fly.
That's the same guy that is babbling like an idiot in the middle of the day sitting in his pajamas.
Now, I think he's faking it. That would be my guess.
Shortly after he's summoned, he's got to go this meeting with all these bankers and investors in Paris.
As soon as he gets back there from America, one of his executives, one of the people who works with him is like,
hey, the Swedish government's investigating you. They're investigating your personal business finances.
They've already got search warrants. They collected many of your important documents.
Auditors are already scouring our books.
That was the night before this very important meeting.
They are supposed to have a meeting at the hotel with all these bankers at 11 a.m. the next day.
That guy leaves, Eva at six o'clock that night. Later that same night.
The night before he's supposed to meet these bankers investors at 11 a.m.,
he walks into a gun shop in Paris and buys a gun and a bunch of ammunition.
The next day in this hotel in Paris, a dozen anxious men are pacing the floor while Eva's employees are sharing that everyone that Eva would be there soon.
But Oscar Ridebeck and Donald Durant were concerned these are his two main bankers because it was the first time they could remember Eva being late.
After several hours, a few of them go to Eva's Paris apartment. They enter the bedroom and they see a man lying flat on his back.
There was blood on his left wrist and a red stain on his shirt. They shouted he is not sleeping. He's dead.
On the bedside table were three sealed personal notes.
One of them said I made such a mess of things that I believe this is the most satisfactory solution for everybody concerned.
They rushed back to the hotel to tell the bankers that Eva Kruger had committed suicide.
Eva's death confirmed everyone's worst fears about the man and his finances. The investment bankers from Lee Higginson, which had sponsored Eva for a decade, were dismayed.
Soon Lee Higginson, one of the most prestigious investment banks of the era, would file bankruptcy and the partners would be ruined.
George Murney, the senior partner, later told investigators what he thought when he heard the news.
I suddenly knew that we had all been idiots. And that is where I'll leave it for the full story. I highly recommend reading the book.
I've already given the book as a gift to one friend already. I think the story is incredible and very unique.
And if you buy the book using the link that's in the show notes and your podcast player are available at FoundersProtkess.com, you'll be supporting the podcast at the same time.
That is 348 books down 1,000 ago. And I'll talk to you again soon.
So I have three things to tell you about real quick. Stick around if you can. I think you'll find this interesting. And there's some deals for you that are not available anywhere else.
And so the first one is highly going to recommend if you don't, if you aren't doing so already to subscribe to Founders Notes.
Founders Notes is the personal tool that I have built. It's what I use to make the podcast. It contains all my every single note, highlight, and all the transcripts for every single book, an episode that I've ever done.
And the way I would describe it is a bunch of different ways to use it. But there's two ideas that I think I actually have around this.
And so one, it actually came from something that Charlie Munger said. The entire reason that Founders Notes exists is because he said that learning from history is a former leverage.
And I think Founders Notes is a tool that enables you to do so. He said, I read Barren's magazine for 50 years. And 50 years, I found one investment opportunity in Barren's out of which I made about $80 million with almost no risk.
I took the $80 million and gave it to Lee Liu who turned it into $400 or $500 million. So I have made $400 or $500 or $400 or $500 million, reading Barren's for 50 years and following one idea.
And so if you subscribe to Founders Notes, you can read my notes and highlights on a different book every single day.
And over the lifetime of your career, the idea that you're not going to find one idea in there that's not additive and helpful and actually improves the odds of your success in business is the probability that it's closest zero as possible.
And when I reread that note about Charlie saying that he made $400 or $500 million from one idea of reading this magazine for 50 years, I was thinking about a few weeks ago when I did that Tarantino episode.
If you listen to that, and even if you didn't, I guess I can tell you Tarantino had this historical database in his head of the entire movie, the history of the entire movie industry because he was obsessed with films.
He says, he has this great line in that book. He's like, I didn't go to film school. I went to films.
And the reason it was important because it was in his head is one, he could call on and use, he can call on that information that's in his head and then use it in his work later on.
And so there's many examples in that episode, right, where he's talking about, hey, I saw this movie, you know, in 1970s and I took that exact scene or a principle from that or an idea from that scene.
And for this movie, I made the 1990s or in 2000, there's exact scenes and kill Bill that first appeared in a movie that he saw 30 years ago.
And so I used this all the time. Let me give you an example. It's from this episode that you just listen to.
There's multiple times where there's something's happening in a book that's like, wait, this is like something else.
And so I just got off the phone. I had to zoom with the team at Readwise because I built this product in partnership with Readwise.
I've been using Readwise since 2018. I mentioned it. You can go back and listen to past episodes to talk about how great this app is.
It had no idea they'd be partnering with them. Go on other people's podcasts, talk about it.
But there was a multiple time. So the reason I bring this up is because there's a lot of different ways to use Founders Notes.
There's a lot of different features in there. And so I just want to highlight one of them that I don't think I talk about enough.
And essentially, it's just this giant database that you can search any time you want for the collective knowledge of history as such.
And it happened because how many times did the importance of incentives and understanding the superpower that incentives are come up on the podcast you just listened to.
So I just talked to the team Readwise. They just updated the keyword search in Founders Notes.
And so we're talking about the issue today. And I noticed it because this week, so I type in the middle example, real world example, I would type in power of incentives.
So actually I'm going to do this with you live. Okay. So what you do is when you're when you subscribe to Founders Notes and if you already have subscription, try this.
But once you log into Founders Notes, you'll see search highlights, right. And in that box is the very top page. I put in power of incentives. I press enter two seconds later.
It's showing me it shows you anytime power of incentives has been mentioned, either in a note, a highlight or on the podcast, because it's search the transcripts too.
Within that two seconds, Founders Notes searched and then the left column will show you every single booker episode. It found the word power of incentives are incentives from one, two, three, four, five, six, seven, eight, nine, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 22, 22, 24, 25, 26, 27, if I'm counting right, 27 different instances inside of those instances.
Sometimes multiple times I mentioned it. So in this, oh my god, I haven't done this episode in years, John Bogle, it's mentioned twice in that book. Same thing happened when I searched. Now this is the markable thing, right. This is why I think it's a tool that if you're going to invest a lot of many, many hours on listening to Founders, this allows you to like, there's going to be something you hear in the podcast and you're like, damn, David said that.
Like, what was that months from now? Well, if you have access to Founders Notes, you just search it, you find it. That's value, but that's worth 100 times the cost right there. But I was blown away by just this, the horrible position that you've our croaker put himself in. So I just searched debt. That is the one keyword I put in debt.
The first thing that pulls up, so again, it pulls up, I can't even count. This is like 30 books. I don't know how many, but the first thing it pulls up, it's Henry Ford in this book today and tomorrow. And he's talking about, it's a, the note I left myself on the highlight is what a powerful warning to be Larry of debt from Henry Ford. And I'm rereading this highlight. And then I'm like, wait a minute. First of all, I didn't remember saying that. When did I do this? It's from the book today and tomorrow. You know what this is from. It's from Episode 80.
I published Episode 80 on July 14, 2019. That is the superpower right there. I remember reading the book. I made the podcast on it. I'm sure I've reread the highlights. But I didn't remember this exact thing. And I wouldn't have if I didn't have access to this tool.
So if you are interested, and if you're already running a successful company, I would buy the lifetime version because that means not only do you get access to every note highlight every feature that I've done everything I've done in the past, you get the future note every future highlight every ability to search every future transcript any additional features I ever add.
And this is a living breathing tool for me. I'm building the tool for myself. So I'm always going to be constantly updating it's embedded in my workflow. So to do that, you had a founders notes.com that is founders with a nest just a podcast founders notes.com. Second thing I want to tell you about is I'm working on.
So think about it. I sit in between a bunch of killer entrepreneurs investors business nerds and then a bunch of people listening to the podcast. I've become friends with are also building products and services for businesses. And so I'm building this out. It eventually be on my website. I will let you know when it's when it's finished.
But essentially I'm going around this is this is also related to why I'm doing events and this idea that comes up or American that relationships run the world. So I am going to friends of mine, right that I built relationships with that I talked to on the phone that I text that I have dinner with that I go and walks for all of them listen to the podcast.
And I'm going to say hey, I want to build it's I don't think it's up there yet, but it'll be on my website. You'll be a partner like deals or something like that. I'll let you know what the name when I do it. But essentially I'm saying hey, you are building a service like we have a good relationship. You love the podcast.
You're building a service that is valuable to the people to listen to founders. I want you. I'm finagling them. I'm coloring them in a way is nicely as possible way. It's like I want you right I will talk about your product and service in return. And I'm going to build this directory of people are doing this and it's already been like I already have a ton of talk to you about you.
And in return, I want you to give them a deal that is a discount that is not available anywhere else. It cannot be just a standard, you know, oh, like not know cannot be standard has to be special. And so there's only there's two I want to talk about real quick one is in direct relation to a main theme of the podcast you just listen to.
So my friend Eric Jorgensen is he how I met him in addition, he in addition to being a fan of founders. He wrote one of my favorite books was the All-Munakana Vol. Robocon I think it's like episode 191 or something like that.
When he wrote that book, he was a customer of scribe. He used scribe media to publish that book. He is now CEO of that company and part owner of that company. He sold well over a million copies of that book.
And so the reason it relates to what we just went over it's like I mentioned the fact that EVAR did something really smart, which is he made it a point to become well known because becoming well known helps serve his business like his needs in business.
Now, obviously we don't want to run Ponzi schemes and all other stuff, but the actual concept behind it's really smart. In fact, when I sat down.
So I was one of the things when I had lunch with Sam Zell shortly before he died. That's one of the things he said to me because we were talking about some of his business. Obviously he sold a company you know for $38 billion, but he was talking about some of the best investments he ever made.
He came because he was writing op-eds in he was a well before he was a national world renowned entrepreneur figure. He was well known famous inside of Chicago. And the way he built his audience in Chicago was he would write op-eds in newspapers.
As a result of that, he was invited to make an investment in the Chicago Bulls. And so he was making the point to me that the bigger your podcast gets the more well known you're you become like you're going to have opportunities presented to you that wouldn't have come otherwise if you didn't have the platform that you have.
And so recently I went to teach at I was invited to teach at Harvard Business School. So if I had to teach at Columbia Business School and Notre Dame too. But at Harvard Business School, I was like listen, I employ you. I implore you, rather. Please. Like you guys are doing so much research so much learning you have not only your main curriculum at Harvard Business School, but all the learning you're doing just organize that.
It doesn't matter if it's a newsletter, I do it in a podcast, write a book. You need to be easy to interface with. And so what scribe media does and the reason I'm telling you about is because there's a thing. Think about all the founders investors executives consultants all these other professionals that are listening to founders right.
You have domain specific knowledge. You just haven't found a way to put it to organize it and then put it out there so you're easy to interface with scribe media essentially will do what they'll do is like they have a bunch of different services anywhere from like if you want to write a book and you want like a like essentially like a co-writer like a guided author.
They have three main things that I think are that you be interested in and you can go to scribe media.com for such founders to look at all this guided author.
Scribe professional and then scribe elite ghost writing. Scribe was already produced 23 New York Times and Wall Street Journal best sellers. Their programs are designed for entrepreneurs consultants executives and other professionals.
And so when I talked to Eric about this idea, this is not like a high margin business, but he gave you discounts that are available nowhere else. And so all listed down below $1,000 off of guided author, $1,000 off of scribe professional and $3,000 off of scribe elite ghost writing.
So scribe media dot com for such founders, the link will be in the show notes as well.
And then the last thing is Vesto. I know the founder of Vesto. It's Vesto dot com V E S T O V is Invictor E is an egg S is in San San Ra T is in Tom.
Oh, is an Oprah dot com. Ben is giving founders listeners $500 off. And this product was actually pulled out of Ben because Ben's main business was helping businesses, whether your bootstrapped or venture funded.
Get a better return on their idle cash and then all these listeners of founders were scheduling a demo because you actually talk to Ben and a bunch of these people had the same problem, which is like, hey, I own a ton of different companies.
These companies have bank bank accounts at different banks. Sometimes in different countries.
Can you please make a dashboard so I can actually see all of my companies financial accounts in one view.
So if you have that problem, go to vesto dot com schedule a demo, tell Ben David from founder sent you and he will give you $500 off.
I will have a lot more deals to announce in the future and then I'll put them all in or they're already in one organized place. It's just not public yet.
But once that is public, I will let you know. Thank you very much for listening. Thank you very much for the support and I'll talk to you again soon.
